Here are a few examples of the various fees you can incur:
- Application Fee
This is a fee that some auto insurance companies charge when you initially apply for insurance. The fee can range from $10.00 to $50.00 or more depending on the company.
- Installment Fee
Installment Fee charges are usually applied when a payment option other than paid in full is chosen. For example, a five pay or 10-payment plan might have a $10 install charge. So, a five-pay plan you would pay an additional $50. A 10-pay plan you would pay an additional $100. If you double up or pay early, you will forgo installment fees. Some companies justify the install fee to set up a convenient payment plan for you.
- Service/Broker Fee
This fee could be the largest charge you incur with your auto policy. The insurance agent or broker with the initial down payment charges this fee.
If the charge is a broker fee, the agent must be a licensed broker (ask for a copy of the current property and casualty broker license). A broker is an independent agent who represents the insured. If the broker is an agent of the company earning a commission he should not charge you a broker fee. In the State of Pennsylvania, only brokers can charge fees.
Some agents charge service fees with the initial down payment. The question you need to ask the agent is what services are going to be performed for the service fee. In Pennsylvania, the insurance department has guidelines on what a service contract should cover.
These service and broker fees can be extremely high, depending on what agency you patronize. Some agents will charge anywhere from $200 to $300 in fees on full coverage policies, and up to a $200 fee on liability policies. This fee is not mandatory especially when the individual is an agent of the company. Try negotiating the fee and emphasize that you will consider changing agencies.
According to the Pennsylvania Insurance Department, agents and brokers must abide by certain regulations when it comes to fees. The following is from a memo from the PA Department of Insurance.
“Agents may never charge a fee for anything related to
application, replacement or servicing of an insurance
contract. These services are compensated through
the normal commission structure. Agent and brokers
are specifically prohibited by the assigned risk
plan from charging a fee. Any such fee is
The only time agents may charge a fee is if he/she performs a service for the insured that is completely unrelated to the insurance placement and servicing process, (e.g., a risk management survey or safety improvement planning). If an unrelated service is provided and a fee is charged, it must be done in the following manner.
There must be a written agreement between the agent and the insured
The agreement must delineate the services to be provided.
c. There must be a full and complete disclosure of the fee to be paid.
d. The service bargained for by the agent and insured are rendered.
e. There must be evidence that the services are or have been rendered; and,
f. The fee charged must be reasonable and related to the service to be made. It cannot be an arbitrary assessment, unrelated to the services to be provided the insured.
Brokers are permitted to charge fees for their services whether they are related to the procurement of insurance coverage or for unrelated services such as risk management, etc. They may not, like agents, charge fees to individuals in the writing of assigned risk plan business. However, in any case, the fees charged must be done according to the above criteria (A-F). Fees may only be charged if the broker is representing the insured, not in cases where the broker is representing an insurer and is serving as an agent.
- Endorsement Fee
Many consumers do not know that companies now charge you for endorsements or changes on your auto policies. For example, you can add or delete a car from your policy and could be charged anywhere from $20 to $25.
Pennsylvania Insurance Department Guideline
- Cancellation Fee
Some companies will charge you for canceling your policy prior to the expiration date.
- Motor Club Fee
The Motor Club is an optional fee and does not have to be purchased. For the price they charge you, you can purchase a better plan with “YAI” Young America Insurance or “RDY” Rodney D Young. The cost of the plans to the insurance agent can be as low as $15 to $20, even though they charge up to $75 a year or more. In addition, the benefits are done by reimbursement, which means you might have to pay for the services up front and then submit receipts to the motor club for payment. What a profit margin at your expense!
- And Late Fee
This fee can be costly if you make your payments late every month. Some late fees can be as much as $20 per month. Auto insurers make millions of dollars a month on fees. These fees are not subject to state insurance department restrictions like premiums. The two most profitable fees have to be the installment fee and late fee.
If an Auto Insurer has 3 million customers and 2 million pay a $5.00 a month installment fee that’s $10,000,000 a month! If the same company has 2 million customers paying a monthly late fee of $15.00, that’s $30,000,000 a month. That’s a total of $40,000,000 a month! Fees are very important to insurance companies.