New Jersey drivers purchase auto insurance to help them cover the costs of accidents, from medical bills to auto repair costs. Making an informed choice about your auto insurance coverage, however, demands attention to certain details. For instance, understanding what no-fault insurance is, how it works, and what items your policy does (and does not) cover can all help you make smarter choices when it comes to buying and using your auto insurance coverage.
While we can’t cover the details of every auto insurance policy in this article, we can provide an overview of the basic elements common to New Jersey no-fault auto insurance policies, and we can explore how those policies differ slightly from policies used in other states.
No-Fault Auto Insurance in New Jersey: Understanding the Basics
In the past, auto accident costs were handled under an at-fault system in New Jersey and other states. In these crashes, bills were paid by whoever was found to be responsible for the accident.
The goal of these policies was twofold, according to HG.org. First, the no-fault system was intended to reduce litigation by providing a way that injured motorists could have their needs met without having to sue one another in court. Second, it was intended to speed up medical care and make it easier for doctors and hospitals to provide, since neither medical providers nor the injured accident victims had to wait for a court case to be decided before medical bills could be paid.
In order for a no-fault system to work efficiently, however, every driver must have auto insurance coverage that he or she can turn to after an accident. Consequently, all no-fault states require drivers to carry minimum auto insurance coverage as a matter of law. The primary form of coverage that addresses medical bills in a no-fault system is called Personal Injury Protection or PIP coverage.
PIP coverage is part of the coverage drivers are required to purchase in no-fault states like New Jersey. PIP coverage pays for medical expenses for the vehicle’s owner, even if that owner is not in the vehicle when an accident occurs. For instance, many policies allow a vehicle owner to file for PIP coverage if the owner is injured by a driver while he or she is walking.
PIP coverage typically covers the relatives of the vehicle’s owner as well, although certain exceptions may apply. For instance, the covered relatives may be required to be related to the vehicle owner by blood or marriage, to reside in the same household as the vehicle owner, or both.
Most no-fault insurance policies, including those in New Jersey, also include two other types of mandated coverage: Bodily Injury (BI) and Property Damage (PD).
Bodily injury liability coverage provides coverage for claims and lawsuits by people who are injured in an accident caused by the vehicle owner, according to the New Jersey Department of Banking and Insurance. Property damage liability coverage provides coverage for damaged property in accidents you cause. It typically covers damage not only to vehicles or their contents in a crash but also to items like fences or mailboxes that may be damaged during the accident.
How New Jersey’s No-Fault Auto Insurance System Differs from the Other States
While the above features of a no-fault auto insurance policy are common among the states that use no-fault, New Jersey’s system is unique in one particular way: It allows drivers to choose whether or not they want an unlimited right to sue, according to the New Jersey Department of Banking and Insurance.
Vehicle owners who choose a “Basic” policy have access to the full limits of the PIP, BI, and PD coverage that they choose under the policy, just as any auto insurance policyholder would have. However, they are also bound by a “limited right to sue.” This right prohibits the driver, family member, or other covered individuals from suing an at-fault driver unless the injured person suffered:
· Loss of a body part,
· Significant disfigurement or scarring,
· A displaced fracture,
· Loss of a fetus,
· Permanent injury, or
If any of these factors apply, the injured person may file a lawsuit against the driver to seek compensation for pain and suffering, as well as any other losses not covered by their insurance policy. If none of these factors apply, the injured person may not sue the at-fault driver.
Drivers in New Jersey who do not wish to be bound by the “limited” right to sue may purchase a “standard” policy, which lets drivers decide whether they want a limited or unlimited right to sue.
While the limited right to sue option is typically less expensive, it also makes it more difficult for an injured person to hold an at-fault driver responsible for an accident. The unlimited right to sue option removes some of the hurdles to holding an at-fault driver accountable, but it comes at a higher cost in insurance premiums for most drivers.
Whether you’re shopping for no-fault auto insurance coverage in New Jersey or in a neighboring state, understanding your options and how coverages change from state to state can help you make more informed choices about the policy you buy and how it works to help you and your family in a time of need.
This article was originally posted on The Patch.