Ace the Connecticut Insurance Laws Challenge 2025 – Secure Your Success Today!

Question: 1 / 400

What is a "surcharge" in insurance pricing?

A refund given to claims-free policyholders

An additional charge due to a specific risk factor

A surcharge in insurance pricing refers to an additional charge applied to a policyholder's premium due to a specific risk factor. This risk factor could be related to various elements, such as the policyholder's driving record for auto insurance, the location of the insured property, or specific health conditions in life insurance policies. Essentially, surcharges are used to reflect the increased likelihood of a claim being filed based on these risk factors, thereby adjusting the cost of the premium to align with the risk being assumed by the insurer.

Understanding surcharges is crucial for policyholders as it highlights how individual circumstances can directly impact their insurance costs. This mechanism ensures that those who present a higher risk pay more for their coverage, which is a fundamental principle of risk management in insurance.

Get further explanation with Examzify DeepDiveBeta

A discount offered for bundling policies

A fee for late payment of premiums

Next Question

Report this question

Subscribe

Get the latest from Examzify

You can unsubscribe at any time. Read our privacy policy