Every US state has a financial responsibility law which makes it a precondition to the privilege of driving that adequate provision is available to compensate those suffering loss and damage as a result. In the majority of at-fault states, this means there’s an obligation to buy a minimum amount of liability coverage to pay third party claims. A few states give the option of self-insurance when you can prove a minimum capital holding. In the twelve states which have adopted a no-fault program, the requirement is to have a minimum amount available to pay your own losses and medical expenses if you are injured. New Jersey is unusual in that you are allowed some degree of choice between at-fault and no-fault cover. If you live in this state, you should work carefully through your options because the can be major differences in the extent of your exposure to potential losses. Should you be hit by an uninsured or underinsured motorist, your claim is from your own insurer up to the limit you agreed when you bought the policy. As a final point, the limit on uninsured cover cannot exceed the amount of liability cover you buy.
The Personal Injury Protection (PIP) element pays for your own treatment should you be injured and is no-fault, i.e. it’s payable no matter which driver caused the accident. Although the title refers to injury, it includes other elements such as loss of earnings, the cost of hiring someone to help care for you at home, etc. When it comes to claims, you must decide whether you want an unlimited right to sue for damages covering pain and suffering or some elements of loss which are not directly represented in money value. If you decide you want to be able to sue, the insurer will provide legal assistance which costs more. If you and your family give up the general right to sue, no legal expenses are payable, so the car insurance rates are lower. This is not a complete surrender of rights. If you lose a body part, suffer a major permanent injury, or a displaced fracture, the right to sue revives.
Remember, your right to sue depends on your choices when you buy car insurance and not on the cover held by the other driver who may be at fault. You also have to choose the threshold at which you or your family members can sue. Independent advice from an agent or car accident attorney will help you make the best decisions. Put the other way round, you will not be allowed to sue if you are driving uninsured, no matter how serious your injuries may be. That’s not worth the risk.
What are the types of policy?
Auto insurance is mandatory in New Jersey, but you are allowed to choose the type and extent of the cover you buy. To help keep the cost affordable, the Automobile Insurance Cost Reduction Act mandates all insurers to offer a basic policy. The idea is that the availability of a low-cost option will reduce the number of people driving uninsured. Obviously, the trade-off is that a low-cost policy only delivers limited cover, so you should only buy the basic policy when you have no assets to protect and only a few family responsibilities. The main limitation is the exclusion of cover against claims for personal injuries. You can opt to add in $10,000 per accident. If you fail to do so, anyone injured can sue you to recover the cost of medical treatment, and compensation for the pain and suffering, loss of earnings, and so on. Even though you hold a basic policy, the insurer will not pay for an attorney to advise or represent you. The basic policy does include PIP for you and any passengers in your vehicle up to $15,000.
The standard policy offers minimum liability cover for $15,000 and $30,000 for personal injuries depending on the number of people inured, and $5,000 to cover property damage. But, if you have assets to protect or family responsibilities, it’s in your interests to increase the amounts for personal injuries and damage to property. You are liable to be sued if the amount of compensation required is more than the amount set in your policy. This can force the sale of your assets, the seizure of your savings, and the garnishment of your pay. As to your own losses, you can opt for collision and comprehensive cover as required.
New Jersey has also required insurers to provide a Special Automobile Insurance Policy (SAIP) to help those entitled to Medicaid with hospitalization. This provides coverage for emergency treatment following an accident only, for an annual policy of $365 (you save $5 if you pay the whole amount upfront).
How much does car insurance cost?
According to a survey in 2013, New Jersey is the thirteenth most expensive state for auto insurance. There are two main reasons for this:
• the risks of an accident are higher because almost all the driving takes place on congested roads in urban environments; and
• the people are more affluent and drive newer and/or more expensive vehicles.
To help you find an insurer, the Department of Banking and Insurance offers online assistance:
• there’s a list of the insurers and their contact information;
• an interactive guide on how to buy a policy is provided; and
• the Insurance Commissioner lists all the insurers, confirms the number of vehicles insured, and gives the number of consumer complaints upheld — obviously it’s not in your interests to buy a policy from a company with a high ratio of valid complaints made.
The site also contains a detailed set of examples to give you an idea of the range of car insurance rates depending on where you live. The examples are:
• young single male;
• young single female;
• unmarried middle-aged man;
• married couple with two vehicles;
• senior married couple.
You can check the details of the sample coverage at http://www.state.nj.us/dobi/division_consumers/insurance/autopremiumexamples.htm. You then enter your zip code. So if you are a single male aged 23 living in East Orange, you can expect to pay between $1,231 (as a government employee) to $5,678. If you compare this to a single female aged 23, the lowest rate is $417, the highest $2,706. It’s a sad fact of statistical life that women have a significantly better record as safe drivers and consequently pay far lower premiums on average than men of the same age and experience. A married couple aged between 30 and 49, living in Montvale would pay between $1,156 and $4,642. Better rates are available to the more experienced drivers.