How Accident Surcharges Affect Auto Insurance Rates in 2024
An at-fault accident stays on your driving record for three to five years, with insurance surcharges averaging $138. Often, insurers charge surcharge fees after an at-fault accident. Read on to learn more about how surcharge fees affect auto insurance rates and how long a surcharge stays on your insurance.
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Heidi Mertlich
Licensed Insurance Agent
Heidi works with top-rated insurance carriers to bring her clients the highest quality protection at the most competitive prices. She founded NoPhysicalTermLife.com, specializing in life insurance that doesn’t require a medical exam. Heidi is a regular contributor to several insurance websites, including FinanceBuzz.com, Insurist.com, and Forbes. As a parent herself, she understands the need ...
Licensed Insurance Agent
UPDATED: Oct 13, 2024
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Advertiser Disclosure: We strive to help you make confident auto insurance decisions. Comparison shopping should be easy. We are not affiliated with any one auto insurance provider and cannot guarantee quotes from any single provider. Our partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.
Editorial Guidelines: We are a free online resource for anyone interested in learning more about auto insurance. Our goal is to be an objective, third-party resource for everything auto insurance related. We update our site regularly, and all content is reviewed by auto insurance experts.
UPDATED: Oct 13, 2024
It’s all about you. We want to help you make the right coverage choices.
Advertiser Disclosure: We strive to help you make confident auto insurance decisions. Comparison shopping should be easy. We are not affiliated with any one auto insurance provider and cannot guarantee quotes from any single provider. Our partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.
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Any involvement in a car accident is highly stressful. This is especially true if you are at fault because you then have to worry about insurance surcharges after you file the claim. Increasing rates often lead to financial strain and long-term stress. (Read More: How to Lower Your Auto Insurance Premiums)
While insurance rates are likely to rise after an at-fault accident, you can alleviate some stress by getting familiar with your company’s policies. Once you understand how these car insurance surcharges are calculated and if you have options for accident forgiveness, the potential increase and length of time it’s applied isn’t as much of a surprise.
Auto Insurance Surcharges And How They Affect Rates
What is an insurance surcharge? A surcharge in insurance refers to a fee added to your monthly bill. Some states have mandatory preset amounts that get charged following an accident. Other states set fee guidelines based on driving record, age, and credit history. What states prohibit surcharges? Check with your state’s insurance department to discover the laws where you live.
Aside from state regulations, your auto insurance company has a custom auto insurance surcharge schedule that outlines specific policies. It provides details to calculate the fees associated with at-fault accidents, speeding tickets, and other moving violations.Schimri Yoyo Licensed Agent & Financial Advisor
Every insurance company has a unique surcharge schedule, but most share a few similarities. The first is the scale of the car accident. The decision to rule the crash, minor or major, depends on the final bill presented to your insurer. Whether the incident in question was the first, the customer reported also has an impact.
The price your insurance company must pay for the damages is the main factor in determining the amount of the additional cost. If you were involved in a minor mishap that was only a few hundred dollars, you might not receive any accident/violations surcharge at all.
Most companies assign a fee according to a sliding scale that is directly proportionate to the size of the accident and the cost of the claim. Damages that amount to less than $1,000 typically result in a small fee charged, while those above $1,000 may create a heftier one. Contact your insurance company to determine what value is assigned to both minor and major claims.
How Insurers Calculate Surcharges
How much is a car insurance surcharge? Every auto insurance company has its own way of calculating surcharges, so you need to read the policies to understand the system. Obtain a copy of the fee schedule or point plan and ask questions if you are unsure of the information.
Some companies are more lenient if it’s your first claim, so that the percentage increase may be smaller. However, subsequent violations usually lead to greater increases. This is at the discretion of the insurer, so check with them about their auto accident rates policy.
The state you reside in also has an impact on these calculations. You can reference The National Association of Insurance Commissioners web map to find your state’s insurance department. Researching this in advance is a good idea to understand how your state handles surcharges.
Another proactive tip is to find out if your insurer has an accident forgiveness plan. Sometimes, this prevents your monthly rates from increasing at the renewal following the first claim on your policy.
There may be criteria you must meet to qualify for accident forgiveness. These include the length of time you have been a customer and the number of years you’ve been accident-free. Some companies allow you to purchase this type of policy as an add-on to your regular rates.
The majority of insurance companies calculate surcharges using a point-based system. Points are given for specific circumstances and behaviors regarding accidents and other events. You may receive points for speeding or driving under the influence. Accumulating more points leads to higher costs. Ask your company what their policy is, as they vary greatly.
Surcharges can stack, so multiple incidents within a few years can result in multiple rate increases. How much is a surcharge for an accident? Each of these can be anywhere from 10% to 40% of your rates. These fees add up to a significant cost that may strain your monthly budget. Do your best to be a safe driver and avoid racking up additional exorbitant fees.
You may also receive a car insurance surcharge any time you file an auto insurance claim, even if you weren’t at fault. This is another reason why it’s beneficial to ask about your company’s policy so you understand what to expect.
Department of Motor Vehicles Point System
The DMV in each state has a point system to track drivers’ licenses. It assigns points for accidents, DUIs, speeding tickets, and other incidents. Most insurance companies base their point system on the DMV system. Any points that you have on your driver’s license from the DMV can directly affect the price of required auto coverage, as well as points given by the company.
Read More: DMV Points vs. Insurance Points Defined
As an example, Virginia’s DMV uses three classifications. Various offenses are given 3, 4, or 6 points depending on the severity. Each classification remains on your driving record for a different length of time. In some cases, an offense stays on your record permanently. Each state issues demerit points differently, so check with your local DMV for the most accurate information.
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What to Do if You’re Issued an Insurance Surcharge
Now you understand the surcharge meaning in insurance as well as how and when a surcharge may be issued, but what can you do about it once it happens? Fortunately, you have a few options. First, find out how long does a surcharge stay on your insurance. Sometimes the fee is dropped after three years. Other times, it could remain for up to five years. Once you reach the designated length of time, reach out to your insurer to ask if the extra charge can be removed.
Know what your category classification is as well. If you are considered high-risk when any accident surcharges have been in place for three or more years, you could potentially be put into a lower-risk category. This can have a tremendous impact on lowering your auto insurance costs, as high-risk customers typically have much higher rates. You could save hundreds of dollars on your bill by asking about your risk category and requesting to move to a lower classification.
Ways To Decrease or Waive Insurance Surcharges
How can you reduce the amount you pay for insurance premiums? If you complete a safe driver or defensive driver course, some companies will drop the fee. Taking an approved course can remove points from your driver’s license. Contact your insurance company to find out if they offer this service.
Some companies also offer a defensive driver auto insurance discount for lower rates after course completion.
Read More: Why You Should Take a Defensive Driving Class
If you have accumulated one or more expensive surcharges on car insurance, you may be able to save money with a different auto insurer. Begin searching for a new company when your current policy is reaching its expiration date. Remember that your rates can’t be changed mid-policy, so any pending surcharges will appear at renewal.
Be honest when shopping around for lower rates. Any insurance company you are considering can view your driving record, so it’s best to be upfront about your auto insurance claim history. Even a new agency will consider existing accident claims, so don’t expect to hide previous marks on your record.
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How do you avoid a surcharge fee? One of the best tips for all drivers is to practice safe driving techniques and avoid future incidents, especially while you have an active insurance surcharge applied to your bill. The existing fees will eventually be dropped, so do your best to prevent more from being added.
More About Insurance Surcharges and Premiums
Surcharge on insurance amounts on your policy depend on your state’s auto insurance laws and carrier. Every company is different. Some may refrain from charging more for a minor, or even major, claim. Others might raise your rates even if you were not at fault. Get the schedule and point system guidelines from your insurer, so you have accurate information to reference.
Educating yourself about your insurer’s policies can alleviate some stress of being involved in a car accident. When you understand how a surcharge on auto insurance premiums is calculated, along with the common scenarios that lead to acquiring these fees, you can anticipate changes in your bill.
Car accidents are always a shock, but you can prepare yourself to handle the financial impact that follows by understanding your auto insurance policy and knowing exactly what is a surcharge on car insurance.
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Frequently Asked Questions
What does a surcharge mean on car insurance?
So, you want to know what does surcharge mean in insurance? Insurance surcharges are additional fees added to your monthly insurance bill after certain incidents, such as at-fault accidents or moving violations. These fees can vary based on state regulations and the policies of your insurance company.
How are insurance surcharges calculated?
What is the surcharge calculation? Each insurance company has its own surcharge schedule, which outlines how fees are calculated.
Factors that can affect the surcharge amount include the scale of the accident, the cost of the resulting claim, and whether it is your first claim or a subsequent violation.
Can changing insurance companies help lower surcharges?
Switching to a different insurance company when your policy is up for renewal could potentially help lower surcharges. Different insurers have varying underwriting criteria and may offer more favorable rates based on your specific circumstances.
When comparing insurance providers, you might ask, can I negotiate a lower insurance premium? There’s a possibility you can, but you need to talk to your insurer.
Do insurance surcharges affect all drivers on my policy?
Who has to pay surcharge? Insurance surcharges typically affect the driver who was involved in the incident that resulted in the surcharge. However, some insurance companies may apply surcharges to all drivers on the policy, so it’s important to clarify this with your insurer.
Can I appeal an insurance surcharge decision?
Yes, you can typically appeal an insurance surcharge decision. Contact your insurance company to understand their specific appeals process, and provide any relevant information or documentation that supports your appeal.
What are three factors that could increase the amount you pay for auto insurance?
You might ask, what are at least 3 factors that affect the cost of auto insurance? Some common factors that affect your rates include age, gender, driving record, vehicle type, and coverage amount.
How long do surcharges last in Massachusetts?
So, just how long does a surcharge stay on your insurance in Massachusetts? Generally, you’ll see higher rates in Massachusetts after a surcharge for up to six years.
And typically how much is an insurance surcharge in Massachusetts per month? That will depend on a variety of factors including the insurance company and each driver’s specific driving record.
What is the purpose of an insurance surcharge?
You’re probably wondering, what is the point of surcharge? Insurance companies issue surcharges to offset the cost to insure high-risk drivers.
What will happen if you accumulate seven Massachusetts auto insurance surcharges?
The Massachusetts RMV will suspend your license or permit once you accumulate a seventh Massachusetts auto insurance surcharge.
How can you reduce your car insurance premiums?
How might you reduce premium rates for vehicle insurance? Well, you can lower auto insurance rates by comparing quotes, locating discounts, and driving safely.
You probably also want to know what is the simplest way to lower your auto insurance premium. Be a safe driver, and follow the road rules.
What is an insurance surcharge meaning?
The insurance surcharge definition usually includes an additional fee that is imposed on a policyholder due to certain circumstances or actions.
A common type is the chargeable accident surcharge, which occurs when the insured individual is deemed responsible for an accident. Understanding what does chargeable accident mean is important since you need to know which incidents you’ll be held accountable for.
Sometimes insurers may offer a defensive driver plan surcharge as part of their pricing structure, rewarding safer driving behaviors while penalizing those deemed higher risk.
These types of driver surcharges reflect the insurer’s assessment of risk, encouraging responsible driving habits and discouraging behaviors that may lead to accidents.
What is an accident surcharge for auto insurance?
The accident surcharge for insurance definition refers to an additional fee or increase in your insurance rates after an at-fault accident. You might wonder what is a chargeable accident? Any accident that you are at-fault for is typically a chargeable accident.
The specific answer to what is the surcharge for an accident will vary according to the insurance provider and state regulations.
How long do accident surcharges stay on insurance?
So you want to know how long does an accident surcharge last? That depends on several different factors including the incident that happened and your previous driving record.
How much does insurance increase after a claim?
The amount that insurance rates increases will depend on several different factors. You might wonder about specific companies and ask questions like will Progressive raise rates after a comprehensive claim? Or will Geico raise my rates after a claim?
Each company has their own process for determining rates and assessing claims, so make sure you talk to your insurance provider to get more specific information.
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Enter your ZIP code below to view companies that have cheap auto insurance rates.
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Heidi Mertlich
Licensed Insurance Agent
Heidi works with top-rated insurance carriers to bring her clients the highest quality protection at the most competitive prices. She founded NoPhysicalTermLife.com, specializing in life insurance that doesn’t require a medical exam. Heidi is a regular contributor to several insurance websites, including FinanceBuzz.com, Insurist.com, and Forbes. As a parent herself, she understands the need ...
Licensed Insurance Agent
Editorial Guidelines: We are a free online resource for anyone interested in learning more about auto insurance. Our goal is to be an objective, third-party resource for everything auto insurance related. We update our site regularly, and all content is reviewed by auto insurance experts.