Demystifying Insurance Surcharges: What Policyholders Need to Know

August 9, 2023

INTRODUCTION

When it comes to understanding insurance premiums, one often hears about terms like deductibles, coverage limits, and discounts. However, one aspect that might not receive as much attention is insurance surcharges. Sablich Insurance Group believes it’s crucial for our policyholders to have a clear understanding of insurance surcharges and their implications. In this blog, we’ll break down the concept of insurance surcharges, their reasons, and how they can impact your insurance costs.

Understanding Insurance Surcharges

An insurance surcharge is an additional charge that an insurance company may apply to your premium based on specific circumstances. These circumstances are usually related to risk factors associated with the insured person or property. Surcharges can lead to an increase in your insurance premium, making it important to grasp why and when they might be applied.

Reasons for Insurance Surcharges

1. Driving Record

One of the most common instances where insurance surcharges are applied is related to driving records. If you’ve been involved in accidents or received traffic violations, you might see a surcharge on your auto insurance premium. Insurance companies view individuals with poor driving records as higher risks, as they statistically have a higher likelihood of making claims.

2. At-Fault Accidents

If you’re found to be at fault in an accident, your insurance company may apply a surcharge to your policy. This is because being at fault indicates a higher likelihood of future claims. The surcharge amount can vary based on the severity of the accident.

3. Traffic Violations

Moving violations such as speeding, reckless driving, or running red lights can also lead to surcharges. Insurance companies interpret these violations as signs of risky behavior on the road.

4. Insurance Claims

Making frequent claims can lead to surcharges. Insurers may increase your premium if you’ve filed multiple claims over a short period, as this suggests that you might continue to file claims in the future.

5. Inexperienced Drivers

New drivers or drivers with little experience are often considered higher risks due to their lack of familiarity with various driving situations.

6. Insurance Fraud

If you’ve been involved in insurance fraud or have attempted to deceive the insurance company, you can expect not only a surcharge but also potential policy cancellation.

Impact on Premiums

Insurance surcharges can vary significantly in terms of the actual amount and the duration for which they are applied. Some surcharges might only affect your premium for a year, while others could last for several years. It’s essential to be aware that surcharges can substantially increase your premium, making it crucial to maintain safe driving practices and minimize claims.

Mitigating Surcharges

While surcharges are applied based on risk factors, there are steps you can take to mitigate their impact:

1. Safe Driving

Maintaining a clean driving record is the most effective way to avoid surcharges related to accidents and traffic violations.

2. Defensive Driving Courses

In some cases, completing a defensive driving course might lead to a reduction in surcharges or the opportunity to avoid them altogether.

3. Bundle Policies

Bundling your insurance policies (e.g., auto and home insurance) with the same company might lead to discounts that can offset surcharges.

4. Claim Avoidance

Being cautious about making claims for minor damages can help prevent surcharges resulting from frequent claims.

CONCLUSION

Understanding insurance surcharges is a crucial aspect of being an informed policyholder. By comprehending the reasons for surcharges and their potential impacts, you can make proactive decisions to maintain a favorable insurance premium. As your trusted independent insurance agency, we’re here to guide you through the intricacies of insurance and help you find the best coverage options for your needs. Feel free to reach out to us with any questions or concerns you may have about insurance surcharges or any other insurance-related topics.

Sablich Insurance Group is licensed in both Pennsylvania and New Jersey.