How Does Personal Injury Protection (PIP) Work in New Jersey?

How Does Personal Injury Protection (PIP) Work in New Jersey?

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Also known as "no-fault" insurance, personal injury protection (PIP) pays for a driver's medical, rehabilitative and living expenses following a car accident — regardless of who was at fault. New Jersey has two unique PIP options: You may use health insurance as your primary medical coverage, and you may be able to sue another driver.

What is covered by PIP in New Jersey?

There are three aspects of a car accident injury that PIP covers: medical costs, work-loss costs and funeral costs. We go into more detail of each below:

Which medical costs are covered?

According to New Jersey law, the following are eligible for a PIP claim:

  • Medical services and medication
  • Surgical services and hospital expenses
  • Rehabilitative costs
  • Diagnostic services
  • Ambulatory services
  • Treatment in accordance with a recognized religion

PIP also covers lost income and essential service benefits

New Jersey PIP car insurance also pays for wages you may lose due to an inability to work as a result of your injury.

The default coverage in New Jersey starts at $100 per week for a $15,000-per-year policy, and it can go up to $5,200 per week. The total annual payout can't surpass the injured driver's normal income. You're also entitled to a $12 daily payout for essential services that you can't do because of an injury. These may include chores such as laundry, shoveling snow or house cleaning.

Death benefits

If a driver dies in a car accident, their next of kin may be entitled to the maximum payout for lost income and essential services. The relative will need to provide proof of death — though not proof of income — and is entitled to a maximum of $1,000 for funeral expenses.

How much does PIP cost in New Jersey?

Every auto insurance company in New Jersey offers PIP insurance, and we recommend comparing quotes from multiple insurers to find the best rates.

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The minimum amount of PIP coverage you need in New Jersey is $15,000, but you can purchase up to $250,000. If you have lower limits and suffer a severe brain or spinal injury, your limits may automatically jump up to $250,000 until you are stabilized.

There's also a standard deductible of $750 in New Jersey, but you may increase or decrease it to curb your premium. If you list your health care policy as your primary medical provider, then your premium will decrease. We checked sample quotes for a 30-year-old driver from New Jersey who chose a basic policy without comprehensive and collision insurance and with a limited tort.

Health care option

Policy limits
Deductible
PIP cost/Total cost

Health provider not primary

$15,000 (minimum)$250$122/$580
$75,000$250$167/$623
$15,000$1,000$113/$571
$75,000$1,000$149/$607

Health provider primary

$15,000$250$89/$548
$75,000$250$113/$571
$15,000$1,000$84/$542
$75,000$1,000$104/$562
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You can get a cheaper premium if you list your health care provider as your primary coverage for medical expenses and choose a higher deductible. But keep in mind that every time you file a PIP claim, you're also on the hook for a copay. It will equal 20% of the difference between your deductible and $5,000.

For example, let's say you get into an accident that costs $10,000 in medical expenses, and you have a $750 deductible.

($5,000 - $750) x 0.20 = $850

You would pay the $750 deductible plus $850 copay, totaling $1,600 out of pocket. The insurance company covers the remaining $8,400.

When to file a PIP claim in New Jersey

PIP will cover your expenses if you or your family members are hurt in a car or school bus accident or as a pedestrian. But you're not covered with PIP if you were:

  • Using your car for a ride-sharing service, such as Uber.
  • Intoxicated or committed a felony with your vehicle at the time of the accident.

Notify your insurance company as soon as possible after the accident. You'll also need to file a PIP form that includes the basics of your injuries, the date and time of the accident, and which medical providers you've already seen. If you're getting treatment from somewhere other than a hospital, such as a specialist, send a notice of "commencement of treatment" to your insurer within 21 days of the first office visit. The insurer may reduce your payout by 10% if you don't send the notice within 30 days or up to 100% if not received within 166 days.

Choosing between PIP and health insurance in New Jersey

New Jersey law recognizes that PIP coverage may overlap with a standard health insurance policy. That's why you may list your health care provider as your main source of medical coverage and use PIP for lost wages and death benefits. The main advantage is that it will reduce your yearly PIP premium. In our research, a 30-year-old sample driver saved about $40 per year when opting for health insurance as the primary means of medical care. But you should consider these points before making your decision:

  • Health insurance limits: Some health insurance policies exclude coverage for car accidents, so check your own policy for its limits.
  • Type of health insurance: If your health insurance provider is Medicare or Medicaid, then you can't explore this option and will need to get PIP coverage.
  • Costs of both types of policies: Calculate the cost of your health insurance deductibles and copays and find its coverage limits. Compare those figures with the cost of PIP and the coverage it offers. Your health insurance policy may offer higher coverage limits for serious medical care or have special provisions for car accidents.
  • Layering coverage: Deductibles are generally higher for health insurance than for PIP. And if you use both policies, you'll need to pay for both deductibles — potentially increasing your out-of-pocket expenses.

Selecting the full tort option or limited tort option

As a no-fault state, New Jersey gives drivers the right to sue other people. If you choose the "full tort" or "unlimited right to sue" option, you may sue for medical costs and pain-and-suffering damages. If you choose the "limited tort" or "limited right to sue" option, you can still sue a driver for medical damages but not for pain and suffering. However, there are exceptions if you suffer a severe or permanent injury.

In our research, we found that choosing full tort will increase your premiums by about $276 per year compared to limited tort. Taking people to court also comes with its own associated fees as well. If keeping costs low is more important to you than suing for pain and suffering, we recommend you choose the limited tort option. With high PIP limits, a health insurance plan and your required bodily injury liability coverage, your medical costs will likely be covered. In the worst-case scenario, you may be able to sue the other driver.

Bailey is a Research Analyst at ValuePenguin, covering insurance. He graduated from Occidental College with a B.A. in Mathematics and a minor in Computer Science. Bailey's analysis of the insurance industry and driver behaviors has been featured by CNBC, the Houston Chronicle and the National Transportation Bureau Safety Board.

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.