Such an increase is known as a surcharge. Surcharges are based on the fact that a driver who has previously been at fault in one or more accidents, or has a record of traffic convictions, has an increased likelihood of being involved in future accidents.

Insurers "classify" drivers according to such criteria as age of driver, geographical location, mileage and type of vehicle. To further refine those classifications, many insurers use "merit rating plans", a point system in which increases are applied according to an individual driver's record (traffic convictions and accidents).

Surcharges are applied to liability (bodily injury & property damage), collision and no-fault (PIP) coverages, and are only allowed for:

  • accidents involving bodily injury, or losses to property in excess of $2,000, where the insured driver is at fault, or
  • convictions for certain violations which are chargeable under the Insurance Law.

A surcharge is used as a tool to properly price the exposure the insurer is writing, and not as a means to recoup payment made under a claim. The total dollar amount paid as the result of a claim does not affect the surcharge. An insured being surcharged for a particular accident will pay the same amount regardless if the damages were (for example) $3,000 or $50,000. In addition, a surcharge may apply if you have two or more accidents or minor convictions within a certain period of time (generally within approximately 3 years) which would not otherwise be surchargeable for only instance as outlined above.