Car Insurance Surcharges: What You Need to Do If You’re Charged One

By Randy Luton | Last Updated: 07/06/2023

Imagine this: You’ve just opened your latest car insurance bill, expecting to see the usual amount due. But instead, your eyes widen as you see a figure significantly higher than what you’re used to paying. Welcome to the world of car insurance surcharges. It’s a place no driver wants to find themselves, but unfortunately, many do.

Whether it’s due to a traffic violation, an accident, or some other factor, a surcharge can feel like a financial punch in the gut. But don’t despair! If you’ve been hit with a car insurance surcharge, it’s not the end of the road.

In fact, there are specific steps you can take to navigate this tricky situation. In this blog post, we’ll demystify surcharges for car insurance, explain why they happen, and most importantly, guide you on what to do if you’re charged one. Buckle up and let’s dive in!

What is a car insurance surcharge?

Car insurance surcharge is a cost that is added to your insurance premium, typically as a consequence of DUI tickets or an accident in which you were at fault. Late payments, coverage gaps, or simply adding a vehicle may also result in a surcharge. Depending on the state, the insurer, and the reason for the surcharge, driver surcharges may be either temporary or permanent.

According to the Insurance Information Institute, surcharges can increase your insurance premium by up to 40% depending on the severity of the violation.

How surcharges on car insurance are calculated?

Some high-risk drivers insurance companies provide insurance to drivers with surcharges while others simply deny it. The precise calculations might differ depending on the insurance provider and the jurisdiction, however, the following considerations are frequently taken into attention:

  • Age and driving experience: Due to their increased accident risk, young and inexperienced drivers sometimes pay higher fees. In the same way, older drivers could be subject to fees because of age-related issues.
  • Driving history: Insurance companies take into account details like prior claims, at-fault accidents, and moving offenses. Higher fees could be imposed on drivers having a history of infractions or accidents.
  • Location: The fees may vary depending on where the insured vehicle is mainly driven and parked. Surcharges may be higher in areas with greater accident or theft rates.
  • Coverage and deductibles: The insured’s deductible level and coverage selections might have an impact on the surcharges. larger premiums and possible surcharges may arise from smaller deductibles or larger coverage limits.

How to avoid surcharge on your car insurance?

There isn’t much you can do to lower a fee once it has been added to your rate. However, if you meet the requirements for an auto insurance discount, you could be able to lower your total premium.

The National Highway Traffic Safety Administration (NHTSA) reports that traffic violations led to an 11% increase in speeding-related crashes and a 9% increase in alcohol-related crashes in 2020.

The ideal situation is to avoid surcharge car insurance entirely. Drive according to these guidelines:

  • Drive carefully.
  • Be careful not to follow other drivers too closely.
  • Observe your speed
  • Surcharges can be avoided by paying your insurance payment on time and avoiding coverage lapses.

Why do insurance companies charge a surcharge?

In order to account for the higher risk brought on by specific conditions, insurance firms impose surcharges on auto insurance. Following are a few explanations why insurance companies could impose surcharges:

  • Risk assessment: To ascertain the possibility of an insured person or vehicle being involved in an accident, insurance firms evaluate risk factors like age, driving history, experience, and vehicle type. Surcharges assist reduce the potential expenses linked to higher-risk drivers or cars because claims are more likely to occur with them.
  • Cost of claims: Insurance firms take these expenses into account. An insured person is more likely to file claims in the future if they have a history of doing so or have been in accidents. Surcharges aid in covering the possible costs associated with these claims.
  • Statistical calculations: To evaluate risk and determine premium rates, insurance firms rely on actuarial calculations and statistical models. Surcharges are a means to modify the premium amount according to the particular risk variables connected to a person or a vehicle.
  • Cross-subsidization: Surcharges assist in keeping the risk pool among policyholders evenly distributed. Insurance firms can support the lower rates of lower-risk customers by charging higher premiums to drivers or vehicles with greater risk profiles. This makes sure that the entire risk and expenses are distributed among all policyholders more fairly.

Frequently Asked Questions

How long does a surcharge stay on your auto insurance?

Surcharges on auto insurance typically last for three years but can extend up to five years for serious offenses.

How defensive driving courses helps in reducing surcharges?

Many insurance companies offer discounts to drivers who complete approved defensive driving courses, which can help offset the cost of surcharges.

What are the emotional and psychological impact of car insurance surcharges?

The stress of increased financial burden due to surcharges can have significant emotional and psychological impacts. It’s important to seek support and maintain a positive outlook during these challenging times.

Dealing with a car insurance surcharge can be challenging, but understanding the process and your options can make it more manageable. By adopting safe driving habits, understanding your rights, and exploring all your insurance options, you can navigate this journey successfully.

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Editorial Guidelines: The above is meant as general information to help you understand the different aspects of auto insurance. This information does not refer to any specific auto insurance policy. Coverages and other features vary between insurers, vary by state, and are not available in all states. References to costs of coverages/repair, average or typical premiums, amounts of losses, deductibles, etc., are indicative and may not apply to your situation. We encourage you to speak to our insurance representative and to read your policy contract to fully understand your coverages.

Randy Luton is the Founder and CEO of RateForce. He is passionate about InsurTech services and has in-depth knowledge about the auto insurance sector of the USA.