Some people talk about surcharge and it sounds like premium increase. If that is why the different terminology? When do I get surcharge and When do I get premium hike? Or can I get both (not that I want to)? Would a company increase my rates and apply a surcharge for the same reason? These are the questions that will be answered below.
Surcharges are applied by auto insurance companies in the following cases
- Accidents that were not known at the time of giving an automobile insurance quote
- Traffic moving violations that have been discovered by the company after checking DMV records
- And risks they see but not handled by their quote system.
Normally, companies will not need to apply a surcharge when an auto insurance quote system can handle the new information. Premiums would automatically be determined by their system. However, when there is a specific risk spotted by the companies they deal with it with surcharges. They may set up a system where high risks are spotted and brought to the attention of the agents dealing with it. For example, too many accidents in a short space of time would raise alarms.
You can see a surcharge as a correction on the premium. This may be applied just after you bought the policy or used during renewal calculations. It is about pricing the risks that are not normally included in premium calculations.
It is possible that you may get a normal premium increase and further increase due to surcharge. It is possible that they may be used to mean the same thing and have the same affect.
It is basically a way of saying either pay up or get lost to the policyholder. They would not be waiting until you come back with a large claim. Many companies are well known for being tough with high risk drivers.