Auto Insurance Requirements in New Jersey

Auto Insurance Requirements in New Jersey

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New Jersey requires all drivers to have some form of liability car insurance coverage. This requirement helps to ensure that if you get into a car accident where you hurt another person or damage their property, some of the financial costs involved will be addressed. 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 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.

The table below briefly summarizes how the two policies differ from one another:

NJ requirements
Basic Policy minimum limits
Standard Policy minimum limits
Bodily injury (BI) liabilityCoverage not included, but $10,000 per accident availableMinimum of $15,000 per person and $30,000 per accident
Property damage liability$5,000 per accidentMinimum of $5,000 per accident
Personal injury protection (PIP)$15,000 per person, per accidentMinimum of $15,000 per person or accident
Uninsured/underinsured motoristNot availableNot required, but available up to the limits you choose for your liability coverages
Collision and comprehensiveNot required, available from some insurersNot required, but available

Basic Policy

A Basic Policy is much cheaper than a Standard Policy. In exchange for lower premiums, however, you forgo several important coverages that come with a Standard Policy, and you 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: Coverage for third-party bodily injury is not automatically included in a Basic Policy. This means that your carrier will not contribute towards any claims made by parties you injure in an at-fault accident 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 limit, as well as an additional 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: Not automatically offered with a Basic Policy, and can only be added as additional coverage by some insurers.
  • Collision and comprehensive coverages: Not automatically offered with a Basic Policy, and can only be added as additional coverage by some insurers.

Basic Policies also limit the consumers' right to sue, which we explain in greater detail below.

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 personal injury protection. 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 for the Standard Policy in greater detail below:

  • Bodily injury liability: A minimum of $15,000 coverage limit per person, with $30,000 total coverage per accident. The maximum per person and per accident limits for bodily injury liability on a Standard Policy are $250,000 and $500,000, respectively.
  • Property damage liability: A minimum of $5,000 coverage limit per accident.
  • Personal injury protection (PIP): A minimum of $15,000 per person, per accident. The maximum per person, per accident, limit for personal injury is $250,000. However, no matter the limit you choose, you also receive up to $250,000 of coverage in claims for certain severe injuries. These include permanent and significant brain injury, spinal cord damage, disfigurement or for medical treatment necessary for other permanent injuries.
  • Uninsured and underinsured motorist coverage: Not automatically included, but available as an additional option.
  • Collision and comprehensive coverages: Available as an additional option from all insurers 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.

However, it offers only an extremely limited form of coverage — just 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 it is only available to an extremely limited number of state residents. Only drivers who are eligible for Federal Medicaid with hospitalization can purchase an SAIP policy.

New Jersey limits the availability of this coverage because it leaves drivers extremely vulnerable. SAIP offers no 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 summarized how this policy works in greater detail in our article about the New Jersey Special Automobile Insurance Policy.

Motorists who choose a Standard Policy will be asked to select an option with regards to their right to sue. The choices 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.

Be aware that if you do not explicitly select an unlimited right to sue, insurers will opt you into a limited right to sue. Additionally, your insurer cannot be sued 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 cannot take your insurance company to court. If you fail to make a decision regarding your right to sue and your insurer, as they are legally obligated to, selects the limited right to sue on your behalf, you cannot later take them to court.

New Jersey drivers should also note that the following limitations are not exclusive to the driver of the policy. Whatever 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 financial or economic damages related to an accident. This includes medical expenses, property-related damages and any loss of wages related to injuries suffered due to the accident. Your legal recourse is restricted to lawsuits related to 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

In contrast, the unlimited right to sue permits the motorist to pursue financial compensation for pain and suffering related to any type of injury. This can open legal recourse for conditions that might result from minor but still debilitating injuries arising from a car accident. 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. We compared quotes across four of New Jersey's largest insurers and found that, all else being equal, rates for our sample driver increased by about 25% when drivers opted for the unlimited right to sue. In some cases, however, rates more than doubled when drivers retained full rights.

Insurer
Monthly rate with limited right to sue
Monthly rate with unlimited right to sue
Percent increase
Progressive$34$4429%
State Farm$114$262130%
Liberty Mutual$178$22526%
Allstate$338$43529%

Methodology

Our sample driver is an employed, unmarried 30-year-old male with an undergraduate degree who drives 12,000 miles each year in the 2015 Honda Civic EX he bought in 2019. 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.

To control for the impact of the limited right to sue, we gave him the following coverages:

Coverage
Limits
Bodily injury liability$15,000 per person/$30,000 per accident
Property damage liability$5,000 per accident
Uninsured/underinsured bodily injury coverage$15,000 per person/$30,000 per accident
Uninsured/underinsured property damage coverage$5,000 per accident
Personal injury protection (PIP)$15,000, with a $2,500 deductible
Personal injury protection (PIP) — Extended Medical Payments$1,000
Collision and comprehensive$500 deductible

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