Insurance Car Insurance High Risk Car Insurance What Is a Car Insurance Surcharge? Definition & Examples of a Car Insurance Surcharge By Emily Delbridge Emily Delbridge Twitter Emily Delbridge is an authority on car insurance and loans who contributed to The Balance for nine years. Delbridge is a licensed Personal Lines Insurance Agent who has been in the insurance business since 2005. Since joining the industry, she has significantly contributed to the book of business for independent agency, Great Michigan Insurance. learn about our editorial policies Updated on May 3, 2022 Reviewed by Erika Rasure Reviewed by Erika Rasure Erika Rasure, is the Founder of Crypto Goddess, the first learning community curated for women to learn how to invest their money—and themselves—in crypto, blockchain, and the future of finance and digital assets. She is a financial therapist and is globally-recognized as a leading personal finance and cryptocurrency subject matter expert and educator. learn about our financial review board Share Tweet Pin Email In This Article View All In This Article Definition and Example of a Surcharge How Car Insurance Surcharges Work What Car Insurance Surcharges Mean for You Alternatives to a Car Insurance Surcharge Definition A car insurance surcharge is an additional fee or penalty that is added to your car insurance premium. It is often the result of a traffic violation or an at-fault accident. Photo: tommaso79 / Getty Images Definition and Example of a Car Insurance Surcharge A car insurance surcharge is a temporary increase in your monthly premium that is assessed as a penalty. It is usually caused by something within your control, like an accident or an excessive number of claims filed. Traffic tickets are another common trigger of surcharges. From the insurance company's perspective, any driver who has committed moving violations and received tickets is a higher risk. Higher-risk drivers are more likely to file insurance claims. For example, if you have filed multiple claims for accidents where you were at fault, your insurance company might flag you as a higher risk, and as a result, it might temporarily add a surcharge to your monthly premium until you have shown that you are no longer a higher-risk customer. How Car Insurance Surcharges Work Surcharges are an insurance company's way to recover the extra costs they put in to handle your claim. These extra costs can be caused by a number of things, such as claim payouts or administrative costs. They can include: Lapses in coverage Late payment Traffic violations At-fault accidents State fees Most insurance carriers review your driving record when you purchase the policy and when you renew your policy. Behaviors that have increased the risk of insuring you, like speeding tickets, reckless driving, or driving under the influence, are noted in your customer profile. The insurance carrier will also look at any claims filed to determine whether a surcharge is warranted. If the insurer has an automated system, the surcharge may be automatically applied. Other times, the company chooses whether or not to add a surcharge. The surcharge will stay for different periods of time, depending on the type of violation. Note Car insurance surcharges come in different amounts, depending on your insurer's policies and what triggered the penalty. Extra charges can last up to five years, and your insurance premium returns to normal when the designated time has passed. What Car Insurance Surcharges Mean for You You can reduce the likelihood that you'll have surcharges added to your car insurance by: Avoiding accidents, speeding tickets, and other moving violationsPaying for small at-fault accidents out of pocket, rather than filing a claimPaying your premiums on timeNever letting your car insurance lapse However, if the damage is done, and it's too late to avoid the surcharge, you should be aware of the repercussions so you can keep charges from getting worse. Do I Need to Pay a Car Insurance Surcharge? If you think your car insurance policy has a surcharge that should have dropped or should not have been applied to your account, contact your insurance agent to dispute the charge. You can try to have a surcharge removed, especially if you are a long-term customer with few or no violations on your driving record. However, in some states, it is illegal for insurance companies to waive surcharges and fees once they have been assessed without a change in circumstances, such as the driver who had the accident no longer being on the policy. Note A state-mandated fee is not within your control or the control of the insurance company. No-fault states often require you to pay extra for medical coverage, and many states assess fees after you reach a certain number of points on your driving record. These fees can be referred to as surcharges. If the company keeps the surcharge in place, you will either have to: Pay the full premium, including the surcharge; orFind less-expensive insurance from another company Either way, you will need to have some kind of car insurance in order to drive legally. What Are the Penalties? If you don't pay your car insurance premium, including any surcharges, your insurance may lapse and leave you uninsured for driving. In some states, if you do not pay a surcharge assessed by your state government (often referred to as an SR-22 or Certificate of Financial Responsibility filing), your driver's license can be suspended, making it illegal for you to drive until it is restored. To have your license restored, you would then have to pay any surcharges and fees owed, including any license-restoration fees. Alternatives to a Car Insurance Surcharge If your car insurance premium increases, it could be due to a rate increase rather than a surcharge. Unlike a surcharge, a rate hike isn't a temporary increase or penalty. It's a fixed increase in your insurance premium. Sometimes, it is the result of an insurance company raising its prices for every policyholder. Note Many companies look at your credit score before setting your car insurance premium. You can lower the cost of car insurance by improving your credit score. Other times, a rate hike may be due to a change in your circumstances, such as: Upgrading to a more expensive carMoving to an area with extreme weather, heavy traffic, or other factors that increase the likelihood of accidents and claimsAdding a teenage driver to your policy If you are confused about why your insurance premium has increased and can't tell whether it is due to a surcharge or a rate increase, call your insurance company. A representative should be able to explain the charges and what has caused them. Key Takeaways A car insurance surcharge is an additional fee or penalty that is added to your car insurance premium for several months or years.It is usually the result of traffic violations or at-fault accidents, as well as administrative violations like frequently missed payments.If a surcharge is added to your premium, you will need to pay it or find another insurer to cover you.A rate hike is usually a permanent premium increase due to changes in your circumstances. It is not a penalty like a surcharge. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. Mass.gov. "Surchargeable Incidents." AutoInsurance.org. "How Long Does a Car Accident Affect Insurance?" New York State Department of Financial Services. "Re: Surcharge on Auto Insurance Premiums." New Jersey Motor Vehicle Commission. "Surcharges." State of Connecticut Insurance Department. "What Affects Premiums."