1. Liability Insurance - increase your coverage from the minimum.
Liability insurance is what covers you when you cause injuries or damages. NJ requires a minimum of $15,000 per injured person and $30,000 total for each accident. If you want the cheapest coverage, you can get this 15/30 policy, however, you will be putting yourself at financial risk, because your insurance company will only cover you up to the limits of your purchased coverage. If you hit someone and their injuries or damages are worth more than your liability coverage you will be personally liable above your coverage. For most people coverage of $100,000 (per person) / $300,000 (per accident) is reasonable. For people with significant assets or income, you may want to increase the limits to 250/500 and consider an excess umbrella policy. For lower income people, if you are eligible for Medicaid, you can buy a No Liability policy. These are often only $365 per year, but they provide almost no coverage, and they offer no liability. See the section below about the Dollar a Day.
2. Uninsured / Underinsured Motorist coverage - get at least $100,000, it's for you!
When you buy auto insurance in New Jersey, your policy will typically include Uninsured Motorist (UM) and Underinsured Motorist (UIM) coverage. Unlike liability insurance, this insurance is for your benefit. If you or a passenger are hit by a hit-and-run vehicle who is not identified, or an uninsured vehicle, or a vehicle with no liability coverage, then you have a UM claim. If your injuries are worth more than the liability coverage of the person who caused the accident, then you may have a UIM claim . In both cases, your own insurance "steps into the shoes" of the responsible party and you can recover for your economic loss and pain and suffering from your own insurance company. Of course, they will not want to pay you and you will need an experienced attorney, but there will be a source of recovery. In NJ the limits of your UM/UIM can not be higher than your liability insurance. You can't cover yourself for $100,000 but only cover others (liability) for $15,000
3. Personal Injury Protection - Don't reduce the $250,000 coverage
In New Jersey we have No-Fault insurance. Your policy contains Personal Injury Protection or PIP for short. If you are injured in an accident involving a car or vehicle, it does not matter who is at fault, your own car insurance pays your medical bills. Therefore, you want the best coverage available for yourself. Most policies cover up to $250,000 in medical bills, which is what I recommend. Recently companies have been offering cheaper "Basic" policies, with only $15,000 in PIP. One hospitalization could wipe this out and you would not have coverage for follow-up care for a serious injury. While health insurance will sometimes pay, they typically balk at paying for auto injuries, can charge out of network copay or deductibles, and in some cases have a right for reimbursement from your injury case. The PIP coverage will be one of the biggest factors of you insurance premium, but it is worth it. You want the most coverage for the best medical care for you or your loved ones.
5. Lawsuit Threshold - What it is and why you don't want it
When you purchase insurance you have the choice to have either the 'lawsuit threshold' or 'no threshold'. The lawsuit threshold is also called the 'verbal threshold', 'limited tort option' or 'limited tort threshold'. All these terms mean the same thing. Basically, if you choose this threshold, in return for paying a lower premium, you give up your right to sue for your pain and suffering if you are injured in any accident, even if it is someone else's fault, unless you suffer a qualifying injury. If you have a limited tort or lawsuit threshold, you can only recover money for your pain and suffering if you have a permanent injury (an injury that won't heal with further medical treatment). If, you choose No Threshold you can recover money for your pain and suffering for any type of injury, serious or minor. While the cost of having No Threshold can be hundreds of dollars per year more in premium, if you can afford it, you will be better without a limitation to your right to sue.
4. Tell the truth in you application. Check it when you renew.
When you purchase car insurance, you are asked to provide the insurance company with various items of information. You must identify all persons of driving age in your household. Many times people will fail to list a relative, intentionally or not, to reduce their premium. Sometimes the insurance agent will leave out certain information when submitting the policy, to keep it cheap. Make sure the garage address for the vehicle is correct. Make sure all vehicles you own are covered under the policy. Any mistake in this information can be a basis for denial of coverage later. Check the information in your policy each time you renew and make sure it is accurate.
Collision Coverage - when is it worth it?
When you purchase New Jersey car insurance, you have the option of purchasing 'collision coverage'. This coverage is what pays for the damage to YOUR car when it s involved in an accident. You have to choose a deductible. Typically the deductible is $500 or $1000. The deductible is the amount the insurance will not cover. If you have a $500 deductible and the car sustains $3,000 in damage your insurance will pay $2,500. You will have to pay the difference, although if the damage was caused by another vehicle, you should consult an experienced attorney to help you get the responsible party's insurance to pay. If you have an old car, which is only worth $500 to $1,500 it usually isn't worth it to have collision because if the car is damaged and the repairs are less than $500, it will all be deductible. If more, it will be totaled (cost of repair exceeds value of vehicle) and you won't get anything from the insurance anyway. If you car is worth more than $1000 get collision.
Dollar a Day Policies - proof that you get what you pay for
These "special" policies which cost $365 per year do almost nothing except keep you from getting a ticket for driving without insurance. They provide no liability coverage, no uninsured motorist coverage or underinsured motorist coverage (read above). They include Emergency PIP only which usually means they will pay the hospital bill only although sometimes they cover for the first 5 days after an accident. You can only get these policies if you are Medicaid eligible and they were basically created as a cheap alternative for people driving without insurance. If you can afford to get a policy with liability and UM/UIM coverage you should do so. These "special" policies offer no protection to you for liability or UM/UIM coverage and only very limited medical. They also have no collision coverage, no rental car, no income continuation benefits. I do not recommend the dollar-a-day policies for anyone.
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