« back to articles

Auto Insurance:  What You Should Know

Everyone knows that automobile insurance is mandatory in New Jersey but just having insurance alone is not sufficient.  Who is covered by your auto insurance and how well does your policy cover you if another driver causes you injury?  These are questions this article will explore and hopefully encourage the reader to examine his policy to determine if he is well insured and if his family is in fact covered to the extent necessary.

New Jersey’s No Fault Insurance Law has endured numerous revisions since it was first adopted in 1972.  Among the more recent amendments occurred in 1998 when the Legislature enacted a provision allowing for “Basic” and “Standard Policies.”  The AICRA (Automobile Cost Reduction Act) revision created the “basic” class of insurance policy, which, for the first time, allowed a private passenger vehicle to be legally registered and operated in this state without liability insurance for bodily injury.  The standard policy which has as its cornerstone coverage for bodily injury continues to be an option and is utilized significantly throughout the State as opposed to the basic option. The minimum amount of liability coverage for a standard policy is $15,000 per person for liability coverage and $30,000 for the entire accident (hence a 15/30 policy).  Combined with this standard coverage comes medical coverage (commonly known as Pip Coverage) and Uninsured/Underinsured (UM/UIM) coverage usually in the same amount as the liability coverage.

Let’s talk about these coverage’s individually starting with liability coverage:  A person can get liability coverage for their auto in a standard form policy with liability limits of up to $500,000 in a combined single limit policy.  Other available liability limits offered are in amounts based on split limits such as 50/100,100/300, and 250/500.  There is usually a separate amount designated for property damage permitted in a split policy.  Combined single limit policies are available for $35,000 up to $500,000.  Liability insurance covers you for any acts associated with driving or operating your vehicle and covers losses which you, the driver, or any permitted and licensed driver, causes to another.  The liability limits protects your pocketbook and bank account-it does not literally protect you.  This is in contrast to the UM/UIM coverage which we will discuss hereafter.

The liability portion of the standard auto policy is to be distinguished from the Pip portion of the policy which pays for any and all medical bills (after a deductible and co-pays which apply) up to the standard policy limits of $250,000.  This coverage inures to the benefit of members of the policy holder’s “resident relatives” (a person who lives with the insured and is related to them) only and is not available persons injured in the other vehicle.  Pip coverage may extend to a passenger in the insured vehicle if they lived with no relative who had available Pip coverage in their household.  Many companies are now offering a reduced premium if insured’s opt for a policy which has reduced Pip benefits if the insured has other medical coverage.  This is called a “Healthcare as Primary” Option.  I strongly suggest that my clients do not request or accept this in their policy as it saves very little in the way of premiums and ends up costing them significantly in time, effort and potentially money in the event the coverage is needed.

Possibly the most important and least understood part of the auto policy is the portion dealing with Uninsured and Underinsured Coverage.  Simply put, Uninsured coverage applies when anther vehicle causes damages or injuries to you or someone in your covered vehicle and that person is either uninsured or they are a hit and run vehicle and cannot be identified.  Similarly, Underinsured coverage applies when a person in a covered vehicle sustains damages due to another’s negligence and that other person is underinsured to the extent that their policy is insufficient to satisfy the injuries or damages sustained.  This is coverage that directly affects my clients and thousands of otherwise appropriately covered drivers throughout the State of New Jersey every year.  These are people who are unfortunately injured by negligent and uninsured or underinsured drivers who do not have enough coverage under their own policies to cover themselves in the event of a catastrophic injury. UM and UIM coverage covers YOU personally and covers your family personally if you are in another vehicle and are significantly injured.  This coverage inures to your benefit and the benefit of your family members and is perhaps the most important portion of your policy.

UM and UIM coverages are never sold in an amount in excess of the liability portion of the policy.  They are however sometimes sold in an amount less than the liability portion of the policy.  This is wrong and should never be allowed to occur and yet I continue to see it year after year.  Additional coverage for liability coverage and hence additional coverage for UM and UIM coverage is not that expensive and should be considered as mandatory for all who use our roads, long considered the most congested in the country.

Another aspect of your insurance policy that can affect you and your family is your choice of a lawsuit threshold or limitation on your (and your family members) right to sue.  Since the implementation of AICRA, the choice of a limited tort threshold (called LOL – which stands for Limitation on Lawsuit means that a covered person can only bring a lawsuit when his or her injuries surpass a certain threshold, i.e. death, dismemberment, loss of a fetus, significant disfigurement or scarring, displaced fractures or a permanent injury shown to be such by objective medical evidence.  Additional protection would be afforded to a policy which does not have a “LOL” but instead has “No Tort” threshold.  Although this choice is more expensive, it is arguably worthwhile in the event of non-catastrophic injuries.

This short article merely touches on aspects of insurance coverage and should certainly not be considered a dissertation on motor vehicle insurance.  There are many aspects of auto insurance and coverage which are not examined herein. In fact, there are books written about this aspect of the law and the interpretations of the courts decisions about the law.  I would offer to anyone a free short consultation (by phone or in person) upon their renewal of their insurance policy to discuss what coverages they should obtain and the reasons for doing so.  Go safely!