Auto Insurance Requirements in New Jersey – ValuePenguin
new jersey law requires all drivers to have automobile insurance that includes liability and personal injury protection (pip) coverages. Comprehensive, Collision, and Uninsured Motorist coverages are not required in New Jersey, but can be added to your policy.
new jersey requires all drivers to have some form of liability insurance coverage. This requirement helps ensure that if you are in a car accident in which you injure someone else or damage your property, some of the financial costs involved will be addressed. like other states, new jersey sets its own minimums for how much coverage you need and what will be enough to comply with the law.
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new jersey also allows insurers to employ a practice known as auto insurance scoring to help set rates. Insurance companies use your car insurance score, usually a combination of your credit information and accident history, to determine how much risk you represent and what your rates should be.
We explain how these requirements and practices work below.
auto insurance requirements in new jersey
new jersey differs from other states in that consumers can choose one of two types of policies: a standard policy or a basic policy. Unlike other states that have a single set of minimum coverage limits, the state minimums for auto insurance in New Jersey depend on the type of policy you choose.
The following table briefly summarizes how the two policies differ from each other:
A basic policy is much cheaper than a standard policy. however, in exchange for lower premiums, you give up several important coverages that come with a standard policy and limit your right to sue the other party after an accident.
We list the coverage options and limits of the basic policy in greater detail below:
A basic policy also limits the policyholder’s right to sue, which we explain in more detail below.
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new jersey standard auto coverage is similar to a minimum policy in most other states. The state sets minimums regarding bodily injury, property damage, and PIP. however, unlike other states, new jersey drivers can lower their premiums on a standard auto insurance policy by voluntarily limiting their right to sue for pain and suffering after an accident.
we describe the coverage limits of the standard policy in greater detail below:
the special car insurance policy
new jersey offers a form of residual auto insurance known as a special auto insurance policy (saip). Known as a “dollar a day” policy, it costs $365 a year, on average.
However, it offers only one extremely limited form of coverage: only emergency treatment after an accident, $250,000 treatment for brain and spinal cord injuries, and $10,000 in death benefits paid to your family, and is only available for an extremely limited number of state residents. only drivers who are eligible for federal inpatient medicaid can purchase a saip policy.
new jersey limits the availability of this coverage because it leaves drivers extremely vulnerable. saip does not offer liability coverage, so you remain financially responsible for all injuries and property damage you cause to another driver, your own non-emergency medical care, and any damage to your property. We’ve outlined how this policy works in greater detail in our new jersey special auto insurance policy overview.
your right to sue and legal limitations
Motors choosing a standard policy will be asked to select an option regarding their right to sue. the options are between a limited right to sue, like a basic policy, or an unlimited right to sue that broadens your legal options. The option you choose impacts the cost of your premium, with unlimited rights resulting in higher quotes.
Note that if you do not explicitly select an unlimited right to sue, insurers will opt for a limited right to sue. furthermore, your insurer cannot be sued for any choice, or lack of choice, you make regarding your right to sue. If you decide to limit your right to sue and later find this coverage to be insufficient, you cannot take your insurance company to court. If you don’t make a decision about your right to sue and your insurer selects the limited right to sue on your behalf, as they are legally required to do, you won’t be able to sue them later.
new jersey drivers should also note that the following limitations are not unique to the driver on the policy. what you decide also applies to your spouse, children and any other relatives who live with you and do not have their own insurance policy.
limited right to sue
Under a limited right to sue policy, you can still sue for economic or financial damages related to an accident. this includes medical expenses, property damage, and any wage loss related to injuries sustained due to the accident. Your legal recourse is restricted to claims related to pain and suffering resulting from an accident. A limited policy prohibits you from seeking damages for pain and suffering except in the following cases:
unlimited right to sue
In contrast, the unlimited right to sue allows a motorist to seek financial compensation for pain and suffering related to any type of injury. this can open legal recourse for conditions that could result from minor but still debilitating injuries stemming from a car accident. Some less serious injuries can cause discomfort or pain for long periods of time. In these situations, an unlimited right to sue could have some benefits.
how the limited versus unlimited right to sue affects your auto insurance premium
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If you’re looking for cheap car insurance in new jersey, one of the best things you can do to keep your rates low is to limit your right to sue. We compared quotes from four of New Jersey’s largest insurers and found that, all other things being equal, rates for our sample driver increased by approximately 75% when drivers opted for the unlimited right to sue. in some cases, however, fares more than doubled when drivers retained all rights.
auto insurance score in new jersey
Auto insurance companies in New Jersey often use a process called auto insurance scoring to help calculate your premiums. Insurance scores are primarily based on the information contained in your credit report, although they also take into account information about motor vehicle accidents and claims. It works similarly to a credit score, with a higher number indicating lower risk and a lower number indicating higher risk.
However, the main difference is that an auto insurance score is designed to measure the likelihood that you will have an accident and need to file a claim. it is not designed to assess your creditworthiness in general. Insurance companies combine your insurance score with standard qualifying factors, such as your residence, location, driving record, and gender, to set your premiums.
Insurance scores also differ from eligibility points. Every insurer will interpret your insurance score differently, and some insurers choose not to use this information at all. by contrast, with eligibility points, point values for specific incidents are standardized among insurers.
The state has implemented several auto insurance score requirements that are intended to help protect consumers.
First, insurance companies must share their scoring models with both the New Jersey Department of Banking and Insurance and their own policyholders. Second, New Jersey requires insurance scores to not include any of the following factors:
However, new jersey lawmakers are currently considering even stronger consumer protections. In early 2021, the New Jersey Senate passed legislation that prohibits auto insurers from factoring credit scores, education, and occupation into rates. If the bill becomes law, New Jersey will join the states where credit scores can’t affect insurance.
Our sample driver is a 30-year-old single working man who owns a 2015 Honda Civic Ex. To control the impact of the limited right to sue, we provide the following coverages:
We obtained quotes from the four major national insurers with the largest market shares in New Jersey. your own rates may differ from those quoted for our sample driver.
valuepenguin’s analysis used insurance rate data from quadrant information services. These rates were obtained publicly from insurer filings and should be used for comparison purposes only; your own quotes may be different.