New Jersey law requires all drivers to carry auto insurance. In 1992, the state established the “New Jersey Personal Automobile Insurance Plan” (NJ PAIP) to help high risk drivers, who have been unable to find auto insurance in the voluntary market, to meet the requirements.
New Jersey has a point system for its auto insurance market. Insurers assign insurance eligibility points to drivers for tickets, suspensions, and at-fault accidents. If you exceed 7 points in a 3-year “look back” period, your insurer may decline to renewal your policy. If you are unable to find any high risk auto insurance through the voluntary market, NJAIP may be your last resort to say on the road. If this is where you land, you’ll want to focus on improving your driving record. This will make you eligible for the voluntary market and lower insurance rates in New Jersey.
What is the New Jersey Personal Auto Insurance Plan (PAIP)?
According to New Jersey’s Department of Banking and Insurance, the PAIP was created “to provide personal private passenger automobile coverages”. NJ PAIP is not an insurance company – it is a clearinghouse that assigns each driver to an insurance company for coverage. This kind of coverage is called assigned risk.
Any company that writes auto insurance in New Jersey must help cover high risk drivers as well. New Jersey has standardized the rates for assigned risk coverage, so they don’t vary from company to company. There are two types of plans available through the NJPAIP: a Basic policy and a Standard policy.
New Jersey PAIP Eligibility
Like many states, New Jersey requires you to certify that you’ve tried and failed to find auto insurance coverage in the voluntary market – at least twice in the last 60 days. If you’ve been declined in the regular market, you qualify as an applicant for assignment through PAIP if you:
- live in New Jersey
- have a car registered (or about to be registered) in New Jersey
- have a valid driver’s license in New Jersey
- have a suspended license due to a lack of auto insurance and need auto insurance to have your license restored
You may not qualify for insurance through PAIP if:
- you don’t have a valid driver’s license
- you don’t pay your insurance premiums on time
- you don’t provide the information requested on your insurance application
You can reapply for insurance as soon as the problem that caused your ineligibility is resolved.
New Jersey PAIP Coverage
You can find the same two types of policies, a Basic or Standard plan, through the NJ PAIP as you would in the regular market in New Jersey. While the Basic plan costs less than the Standard plan, it also offers limited coverage. If you are in an accident where the damages exceed your coverage, you may be liable for the rest of the bill. Additionally, if you choose a Standard policy you can purchase additional coverage such as Collision and/or Comprehensive Coverage and Uninsured/Underinsured Motorist Coverage.
The duration of coverage in New Jersey for high risk drivers is typically 3 years. Every insurer will send you a notice at the end of the policy term. At that time the insurer will review your driving record for the preceding 3 years. Insurance eligibility points older than 3 years will be dropped, and if your eligibility points fall below 7, you can search for insurance in the voluntary market once again.
If you are still a high risk driver, the assigned company can either renew you, or place you back in the “pool” and the NJPAIP will assign you to a new insurer for another 3 year term.
New Jersey insurers offer high risk drivers the same mandatory coverages as those normally found in the voluntary market. These include:
|Minimum Coverage with a Basic Policy||Minimum Coverage with a Standard Policy|
|Bodily Injury||Not included||$15,000/$30,000 up to $250,000/$500,000|
|Property Damage (PD)||$5,000 per accident||$5,000 up to $100,000 or more|
|Personal Injury Protection (PIP)||$15,000 per person per accident - up to $250,000 for certain injuries||$15,000 per person per accident up to $250,000 or more for certain injuries*|
Naturally, the higher your coverage amount, the higher your premium will be.
There are optional coverages as well available for purchase with the Standard policy, with premiums that will vary based on insurer.
|Optional Coverage with a Basic Policy||Optional Coverage with a Standard Policy|
|Bodily Injury (BI)||$10,000 per accident|
|Uninsured Motorist Coverage||none||Up to the amounts selected for liability coverage (15/30/5 and up to 250/500/100)|
|Comprehensive||available as an option from some insurers||Deductibles of $1,000, $1,500, and $2,000 available for actual cash value up to $60,000|
|Collision||available as an option from some insurers||Deductibles of $1,000, $1,500, and $2,000 available for actual cash value up to $60,000|
Note that New Jersey will cover more than the stated limits for certain injuries. According to the NJ Department of Banking and Insurance, those injuries include permanent or significant brain injury, spinal cord injury or disfigurement. Also note that New Jersey allows coverage limits for comprehensive and collision to be set by your insurance company. Some insurers may not offer this coverage based on how they assess you as a risk. Others will cover you, but at rates and coverage limits they negotiate with you.
New Jersey PAIP Premiums and Payments
Premiums for auto insurance through the New Jersey PAIP are usually higher than those you would find in the voluntary market. Based on your driving record, your premium could be significantly more expensive, depending on your eligibility points among other factors.
You can expect to pay steep rates for insurance through N JPAIP. NJ auto insurance premiums in the voluntary market are already higher than most other states, with the average driver paying $1,905 annually for auto insurance. Additionally, in 2010 the NJ PAIP increased rates generally by 4%, and increased the rates for PIP, which is mandatory coverage in New Jersey, by 13.4%.
Another factor that could impact your premium through the NJ PAIP is whether you select a Basic or Standard Coverage Plan. Standard Coverage Plans are always more expensive than Basic Plans in New Jersey, but they do offer more coverage that can protect your assets in the long-term.
New Jersey insurance companies, including the NJ PAIP, typically set rates based on many factors. These include your driving record, vehicle type, where you live, gender and age, marital status, and how you use your vehicle. Each company uses its own set of criteria to evaluate and price you as a risk.
The NJ PAIP offers two different payment plans: an Advance Premium Payment Option and an Installment Payment Option. When you shop for insurance, you can discuss with your agent which payment option will be more suitable for you based on your financial circumstances:
- Advance Premium Payment Option - When you apply for coverage through the NJ PAIP, you will have to pay 100% of the premium with your application
- Installment Payment Option: You will have to submit a deposit of 30% of the premium at the start of the policy term and the rest in six installments over the course of a period of nine months
When you are insured through the NJ PAIP, you can shop for cheaper insurance at any time, not just when your policy is up for renewal. If you find a better price, you can cancel your old policy and get a refund of your unused premium.
How to Get Insurance through NJPAIP
Contact any licensed auto insurer in New Jersey to inquire about high risk insurance. It’s a good idea to shop around to find the best policy for your situation.
For more information about New Jersey’s PAIP, call Department of Banking and Insurance Consumer Hotline: 1-800-446-7467 or visit the NJ PAIP web site.