An insurance surcharge is an additional charge on an insurance policy which is usually based on rating factors. Ratings are used to assess the degree of risk associated with a particular policy, and in many regions, insurance companies are allowed to levy surcharges on people with increased risks. In addition, an insurance surcharge may also be charged by the government for certain types of rating categories, or to help cover overall insurance costs.
In the case of an insurance surcharge charged by an insurance company, the charge is over and above the other charges associated with the policy. Insurance companies are usually limited by law when it comes to the types of surcharges they can assess. For things like car insurance, insurance companies can up rates in response to drunk driving incidents and other things on a driver's record which suggest that the policy is riskier to carry than other policies. Likewise, insurance companies can assess flood, earthquake, storm, and other types of surcharges on policies for property insurance to help cover the risks. Surcharges can also show up health insurance for people such as smokers.
A government insurance surcharge can work in several ways. Insurance customers may be charged a surcharge as part of the penalties for a crime, most commonly drunk driving. In this case, both insurance companies and the government collect surcharge monies from the driver, with the government often using the proceeds of insurance surcharges to do things like subsidizing insurance for low-income drivers or funding education campaigns about drunk driving.
Governments can also charge businesses an insurance surcharge. This is typically done when a business has more than a set number of employees, with the surcharge being used to help fund provision of insurance to those employees and possibly to other people as well. In this case, the insurance surcharge is often used in regions where the government wants to provide insurance services to everyone and the government uses surcharges to generate funds which are used to provide insurance coverage to people with low income who cannot afford it on their own.
People can fight an insurance surcharge if they feel that it poses an undue hardship or that it was unfairly assessed. It is advisable to consult a lawyer for assistance with this, and to be prepared for a potentially protracted battle, as it is often difficult to overturn surcharges, especially if they are charged by the government.