How Car Insurance Surcharges Different from Rate Hikes

There are a few reasons for price fluctuations. Vehicle insurance surcharges lead to premium increase and therefore people may not be able to differentiate them from rate hikes. However, not every upward movement is due to a penalty. Separating them from each other helps in efforts to gradually lower policy costs and keep unexpected hikes at bay. This post will try to define them and give several examples of their use in an attempt to highlight differences.

Usually, people use “rate increase” to mean both surcharge and upward change in car insurance prices. Both would naturally result in higher premiums and that may confuse people. However, the underlying reason is different and that is where the distinction comes from. Also, you can get both surcharge and price increase at the same time but the reasons behind them are not related.

Motorists get car insurance surcharges for traffic violations like reckless driving citations or speeding tickets. Causing accidents is another obvious reason for applying a levy on premiums. But it could be for other reasons like missing a payment, lapse in coverage or deteriorating credit score, depending on the company and the state rules.

You usually have control over incidents that are considered risky and end up being costly. Sometimes, you may have to pay this additional cost because of a bad driver in a household or because of the collisions they caused. But it is still levied for something that is done by someone you include in your policy.

On the other hand, rates may go up for things that are out of your control. For example, underwriters may have to push up prices for every policyholder after a bad financial year with losses. Usually, everyone ends up paying higher vehicle insurance rates after something like a hurricane, regardless of making a claim or not.

So, two clear distinctions are; a surcharge is an additional car insurance premium applied for something the policyholder or listed drivers have done. A rate hike usually happens due to something out of drivers’ control like uptick in inflation. While the former is in effect a penalty applied only to certain motorists, the latter is applied to everyone else.

Most states clearly define surcharges and the circumstances in which they can be levied. Also, each company gets them approved by state insurance departments. So, they cannot charge it willy-nilly or discretionally. They have systems in place for automatically checking certain records periodically and loading the costs appropriately.

And the related reasons need to show on driving records before motorists can be penalized for them. Also, it should stop when a ticket comes out of a record.

If you know exactly why you are spending extra you can perhaps deal with it better. For example, if you know a speeding ticket is coming off record shortly, you can arrange coverage in a way that will allow you to get cheaper prices afterwards. You can get cheap quotes by avoiding anything that raises the risk level and reduces claims. That is why you may want to consider paying out of pocket when you have a small loss.

Distinguishing auto insurance surcharges from unexpected rate increases may allow policyholders to adjust their response accordingly. If you are a great driver with no claim or traffic violation you can easily find a cheaper alternative quote when your renewal comes higher than you expected. On the other hand, they may have to search for a particularly lenient company when they know that their premium has gone up for a recent small claim.

Many people may be under the impression that to keep moving from one to another isn’t good. It may be so but this doesn’t mean that you have to put up with everything. Sometimes, you may be being deliberately priced out because your vehicle insurance company is distancing itself from certain types of risks or drivers. Perhaps you don’t get the hint and keep spending more than you should to stay where you are not wanted.

You can call the agent or the provider directly and get them to explain it to you if you are not sure or clear about what is happening. They should be able to tell you what additional costs you are paying and why your automobile insurance premium has gone up. Don’t be shy and put up with it, especially when it is so easy to check and find alternative solutions online and offline. Furthermore, don’t overstay your welcome.