What is Surcharge?
A surcharge is a fee that an insurance company adds to a policyholder’s premium, usually as a result of increased risk or a history of claims. In personal and business insurance, this could happen due to factors like multiple claims within a short period, traffic violations in auto insurance, or other behaviors that make the insured more costly to cover.
For example, in auto insurance, if a driver is involved in an accident and is found at fault, the insurance provider may apply a surcharge to their premium for a set period. Similarly, a homeowner’s insurance policy may include a surcharge if the property has been the subject of repeated claims, such as for water damage or theft.
Surcharges typically last for a few years and can increase overall insurance costs. Policyholders can reduce or avoid surcharges by maintaining a clean claims history and following best practices to minimize risks.