What are insurance surcharges and how long do they last?

An at-fault accident stays on your driving record for three to five years, with insurance surcharges averaging $137.75.

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Rachel Bodine graduated from college with a BA in English. She has since worked as a Feature Writer in the insurance industry and gained a deep knowledge of state and countrywide insurance laws and rates. Her research and writing focus on helping readers understand their insurance coverage and how to find savings. Her expert advice on insurance has been featured on sites like PhotoEnforced, All...

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Written by Rachel Bodine
Feature Writer Rachel Bodine

Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years (BBB A+). He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com and Safeco. He reviews content, ensuring that ex...

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent Daniel Walker

UPDATED: Jun 10, 2022

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Things to Remember

  • Each company uses an insurance surcharge schedule to calculate the increase in your rates following an at-fault accident
  • The increase depends on the scale of the damages and the cost of the resulting claim
  • The majority of fees range from 10% to 40% of your insurance rates

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.

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 charges 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. Several factors contribute to rising costs after an incident.

What are insurance surcharges?

A surcharge refers to a fee added to your monthly bill. Some states have mandatory preset amounts that are charged following an accident. Other states set fee guidelines based on driving record, age, and credit history. 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 surcharge schedule that outlines specific policies. It provides details to calculate the fees associated with at-fault accidents, speeding tickets, and other moving violations.

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Factors for Insurance Surcharge Calculation

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 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 Surcharges Are Calculated

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.

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.

Demerit Point System

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. 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 surcharge any time you file a 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.

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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.

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.

What To Do If You’re Issued an Insurance Surcharge

Now you understand 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 the additional amount will be added to your bill. 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

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.

If you have accumulated one or more expensive surcharges, 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 insurance claim history. Even a new agency will consider existing accident claims, so don’t expect to hide previous marks on your record.

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.

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Final Thoughts About Insurance Surcharges

Insurance surcharge amounts on your policy depend on the regulations of your state 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 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.

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