Auto Insurance Requirements in New Jersey
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New Jersey requires all drivers to have auto insurance. It must include both liability and personal injury protection (PIP) coverages. New Jersey doesn't require uninsured motorist and collision and comprehensive coverages, but you can add them to your policy.
New Jersey requires all drivers to have some form of liability car insurance coverage. Liability car insurance helps pay for injuries and property damage that you’re responsible for in an accident. Liability coverage will not cover your own injuries or damage to your car. Like other states, New Jersey sets its own minimums regarding how much coverage you need and what will suffice to comply with the law.
New Jersey also allows insurance companies to use a practice known as auto insurance scoring to help set rates. Insurance companies use your auto insurance score to determine how much of a risk you pose and what your rates should be.
New Jersey car insurance requirements
New Jersey differs from other states in that consumers can opt for 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, state minimums for auto insurance in New Jersey depend on what type of policy you choose.
NJ requirements | Basic Policy minimum limits | Standard Policy minimum limits |
|---|---|---|
| Bodily injury (BI) liability | Coverage not included, but $10,000 per accident available | Minimum of $25,000 per person and $50,000 per accident |
| Property damage liability | $5,000 per accident | Minimum of $5,000 per accident |
| Personal injury protection (PIP) | $15,000 per person, per accident | Minimum of $15,000 per person or accident |
| Uninsured/underinsured motorist | Not available | Not required, but available up to the limits you choose for your liability coverages |
| Collision and comprehensive | Not required, available from some insurers | Not required, but available |
Basic Policy
A Basic Policy is much cheaper than a Standard Policy. But, you lose several important coverages that come with a Standard Policy. You also limit your right to sue the other party after an accident.
We list the coverage options and limits for the Basic Policy in greater detail below:
- Bodily injury liability: A Basic Policy doesn't automatically include bodily injury coverage. This means that your company won't pay for injuries you cause unless you choose to add an optional $10,000 coverage limit for all persons per accident.
- Property damage liability: $5,000 coverage limit per accident.
- Personal injury protection (PIP): $15,000 per person, per accident, as well as extra coverage of up to $250,000 for certain severe injuries. These include permanent and significant brain injury, spinal cord damage, disfigurement or other permanent injuries requiring care at a trauma center or acute-care hospital.
- Uninsured and underinsured motorist coverage: A Basic Policy doesn't include this coverage.
- Collision and comprehensive coverages: A Basic Policy doesn't include this coverage. But you can typically add it for an extra cost.
A Basic Policy also limits your right to sue.
Standard Policy
New Jersey's Standard Policy auto coverage is similar to a minimum policy in most other states. The state establishes minimums with respect to bodily injury, property damage and PIP. Unlike other states, New Jersey allows drivers to lower their rates on a standard auto insurance policy by limiting their right to sue for pain and suffering after an accident.
We describe the coverage limits for the Standard Policy in greater detail below:
- Bodily injury liability: A minimum of $25,000 per person, with $50,000 total per accident. The maximum limits for bodily injury liability on a Standard Policy are $250,000 per person and $500,000 per accident.
- Property damage liability: A minimum of $5,000 per accident.
- Personal injury protection (PIP): A minimum of $15,000 per person, per accident. The maximum limit for personal injury is $250,000. However, no matter the limit you choose, you also get up to $250,000 of coverage in claims for certain severe injuries. These include permanent and significant brain injury, spinal cord damage, disfigurement or medical treatment necessary for other permanent injuries.
- Uninsured and underinsured motorist coverage: Not automatically included, but available as an extra option.
- Collision and comprehensive coverages: Available as an extra option from all companies under a Standard Policy.
The Special Automobile Insurance Policy
New Jersey offers a form of residual auto insurance known as the Special Automobile Insurance Policy (SAIP). Known as a "dollar a day" policy, it costs $365 a year, on average.
The SAIP only offers an extremely limited form of coverage. This includes emergency treatment after an accident and $250,000 for treatment of brain and spinal cord injuries. The SAIP also covers $10,000 in death benefits paid to your family.
It's only available to an extremely limited number of state residents. Only drivers who are eligible for Federal Medicaid with hospitalization can buy an SAIP policy.
New Jersey limits the availability of this coverage because it leaves drivers extremely vulnerable. The SAIP doesn't offer liability coverage. So you must pay for all injuries and property damage you cause to another driver. You'll also have to pay for your own nonemergency medical care and damage to your car.
Cheapest companies in New Jersey for minimum liability
Your right to sue and legal limitations
Drivers who choose a Standard Policy must select an option with regard to their right to sue. The choices are between a limited right to sue and 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.
If you don't select an unlimited right to sue, insurance companies will opt you into a limited right to sue. Additionally, you can't sue your insurance company for whatever choice — or lack of choice — you make with regard to your right to sue.
If you decide to limit your right to sue and then later find this coverage to be insufficient, you can’t take your insurance company to court. If you don't make a decision regarding your right to sue and your company selects the limited right to sue on your behalf, you can’t take them to court later.
New Jersey drivers should also note that the following limitations are not only for the driver of the policy. Whatever you decide also applies to your spouse, children and any other relatives who live with you and don't have their own insurance policy.
Limited right to sue
Under a limited right to sue policy, you can still sue for financial or economic damages after an accident. This includes medical expenses, property damage and any loss of wages due to injuries from the accident. However, in most cases you can't sue for pain and suffering resulting from an accident.
A limited policy prohibits you from pursuing pain and suffering damages except in the following cases:
- Loss of a body part
- Significant disfigurement or significant scarring
- A displaced fracture
- Loss of a fetus
- Permanent injury, when the body part in question will not heal to normal function with further medical treatment
- Death
Unlimited right to sue
The unlimited right to sue allows you to seek compensation for pain and suffering related to any type of injury. This means you can sue for conditions that might result from minor but still life-altering injuries after a crash. Some less serious injuries may cause discomfort or pain for prolonged periods. In these situations, an unlimited right to sue could yield some benefits.
How the limited vs. unlimited right to sue affects your auto insurance premium
If you're looking for cheap car insurance in New Jersey, one of the best things you can do to keep your rates down is to limit your right to sue. Rates increase by about 74% when you choose the unlimited right to sue. In some cases, however, rates more than double when drivers retain full rights.
Insurer | Limited right to sue | Unlimited right to sue | Percent cost increase |
|---|---|---|---|
| Average | $946 | $1,647 | 75% |
| Geico | $530 | $810 | 54% |
| NJ Manufacturers | $833 | $1,445 | 53% |
| State Farm | $973 | $2,539 | 74% |
| Allstate | $1,192 | $1,838 | 34% |
| Progressive | $1,201 | $1,604 | 161% |
Rates are annual premiums.
Auto insurance scoring in New Jersey
Car insurance companies in New Jersey often use a process called auto insurance scoring to help determine your quotes. Insurance scores rely mostly on your credit report, though they also factor in motor vehicle claims and accidents. It works similarly to a credit score, with a higher number meaning lower risk.
An auto insurance score helps insurance companies gauge how likely you are to cause an accident or make a claim. Insurance companies combine your insurance score with standard rating factors to determine your rates. This includes your residence, location, driving history and gender.
Insurance scores also differ from eligibility points. Each carrier will interpret your insurance score differently, and some carriers choose not to use this info at all. By contrast, with eligibility points, the point values for specific incidents are the same across insurance companies.
New Jersey has several requirements for auto insurance scoring that help protect drivers.
First, insurance companies must share their scoring models with the New Jersey Department of Banking and Insurance and their customers. Second, New Jersey requires that insurance scores not include any of the following factors:
- Demographic info, such as race, ethnicity, sex, age, religion, income or address. However, some of these factors, like address, sex and age, can affect your overall rate, even if they can't affect your insurance score.
- Unpaid medical bills.
- The number of inquiries for home and auto loans made within the past 30 days.
- Extraordinary life events and their impact on your credit score. This includes things like catastrophic illness or injury, death of a family member, temporary loss of employment, divorce or identity theft. In this case, your company must either give you a neutral insurance score or only take into account credit info not affected by the event.
However, New Jersey legislators are currently considering even more robust consumer protections. In early 2021, the New Jersey Senate passed legislation banning auto insurers from factoring credit scores, education and occupation into rates. If the bill becomes law, New Jersey will join the states where credit score cannot impact insurance.
Methodology
Our sample driver is an employed, unmarried 30-year-old male who owns a 2015 Honda Civic EX. To control for the impact of the limited right to sue, we gave him the following coverages:
Coverage | Limits |
|---|---|
| Bodily injury liability | $25,000 per person/$50,000 per accident |
| Property damage liability | $5,000 per accident |
| Personal injury protection | $15,000 |
| Personal injury protection — Extended Medical Payments | $15,000 |
We obtained quotes from the four major national insurers with the largest market shares in New Jersey. Your own rates could differ from those quoted to our sample driver.
ValuePenguin's analysis used insurance rate data from Quadrant Information Services. These rates were publicly sourced from insurer filings and should be used for comparative purposes only — your own quotes may be different.
Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.