What is liability coverage?
Why must I buy personal injury protection?
Do I have to pay for uninsured and underinsured motorists?
Am I required to buy collision and comprehensive coverage?
What types of losses are covered by collision and comprehensive?
What factors affect the cost of auto insurance?
How does auto insurance fraud affect me?
What is the Department of Insurance doing to combat fraud?
An automobile insurance policy consists of several types of coverages. An insurance company charges a separate premium for each coverage, the sum of which determines the total premium for your policy.
The State of New Jersey requires all registered motor vehicles to be insured for liability, personal injury protection (PIP) and uninsured motorist coverages. Collision, comprehensive and other coverages are optional.
Liability coverage pays for injuries to other people (bodily injury liability) or damages to their property (property damage liability) if you are responsible for their losses. State law requires drivers to purchase coverage which will pay, per accident, a minimum of $15,000 for any one person's injuries; $30,000 when more than one person is injured; and $5,000 for property damage. Some companies, however, sell a combined single limit (which will pay for both bodily injury and property damage losses) of at least $35,000 per accident.
You may purchase higher limits of liability coverage at an additional cost. (Note: An increase in liability limits will not raise your premium by the same proportion because the cost per dollar of liability coverage decreases as limits are increased. [back to top]
Why must I buy personal injury protection?
Personal injury protection (PIP) eliminates the need for an auto accident victim to seek legal action to recover medical expenses. PIP, which is also known as no-fault coverage, pays all reasonable medical expenses up to $250,000 per person per accident, regardless of who is at fault for an auto accident. The minimum deductible - the amount a policyholder must pay - is $250, and an insurer reimburses 80 percent of the expenses between $251 and $5,000. Your insurer pays 100 percent of the eligible expenses exceeding $5,000.
You may choose deductibles of $500, $1,000 or $2,500, resulting in a proportionate reduction in your PIP premium. You also may qualify for a lower PIP premium by selecting your health insurer or health maintenance organization (HMO) to pay for medical bills resulting from an auto accident. [back to top]
Do I have to pay for uninsured and underinsured motorists?
No. Uninsured motorist coverage protects you against other drivers who have no insurance and are legally responsible for injuries to you, your passengers or resident relatives or for damages to your vehicle or its contents.
Underinsured motorist coverage provides you with protection against drivers who have liability insurance with low limits. If you are involved in an accident caused by an underinsured driver, this coverage will pay for damages up to the difference between your underinsured motorist coverage limit and the other driver's liability coverage limits.
State law requires drivers to purchase uninsured motorist coverage which will pay, per accident, a minimum of $15,000 for any one person's injuries; $30,000 when more than one person is injured; and $5,000 for property damage, or a combined single limit of at least $35,000 per accident. There is a mandatory $500 deductible for uninsured/underinsured motorist property damage coverage. As with liability insurance, higher uninsured/underinsured motorist limits are available at an additional premium. [back to top]
Am I required to buy collision and
comprehensive coverages?
No, collision and comprehensive coverages are not required by law. However, if
your vehicle is financed or leased, the lien holder or leasing company may
require you to purchase these coverages. [back to top]
What types of losses are covered by
collision and comprehensive?
Collision coverage pays for damage to your vehicle caused by your vehicle
striking objects such as other cars, trees or telephone poles, or for the
vehicle overturning, or for other moving objects hitting your vehicle.
Comprehensive coverage pays for nearly every other kind of damage to your vehicle, such as fire, theft, flood, vandalism or contact with a bird or animal.
Collision and comprehensive insurance will reimburse you only up to the actual cash of the vehicle, minus your deductible. The standard deductible for both types of physical damage coverage is $500. However, you may buy coverages with higher or lower deductibles. Lower deductibles result in higher premiums; higher deductibles reduce premiums.
You may purchase other optional coverages such as additional PIP, towing and rental reimbursement. Be sure to ask your agent, broker or company about the availability of these coverages. [back to top]
What factors affect the cost of auto
insurance?
There are many factors that determine the amount that you will pay for auto
insurance. Current New Jersey law permits auto insurance companies to assign eligibility
points to drivers with at-fault accidents and traffic violations. For
example, a ticket for driving between 15 and 29 miles per hour over the posted
speed limit would result in four eligibility points.
These surcharges may be applied for three years. Drivers with accidents and violations pose a higher risk to insurance companies than policyholders with clean records and, therefore, insurers may charge higher premiums based on eligibility points.
Remember - driving safely saves money and lives, too.
Premiums also are based on a driver's age, gender, place of garaging and use, among other factors.
Collision and comprehensive premiums are dependent upon the value and type of vehicle. You can reduce your premium by raising your comprehensive and/or collision deductibles. Many companies offer deductibles of up to $2,000 for these coverages.
State law requires insurers to provide comprehensive and collision premium discounts for certain anti-theft and safety devices, such as audible alarms, vehicle tracking systems, air bags and anti-lock brakes. You should discuss the availability of these discounts with your insurance company, agent or broker. [back to top]
How does auto insurance fraud affect me?
The harsh reality is that fraud costs the state's citizens billions of dollars
each year. Approximately 20 percent of your insurance premium goes to pay phony
claims - about $200 per vehicle. Nationally, the Coalition Against Insurance
Fraud estimates that fraud in all lines of insurance costs consumers
approximately $68 billion per year - that's $800 for each American family.
It is important to remember that insurance fraud doesn't pay - you do!
What is the Department of Insurance doing
to combat fraud?
New Jersey has some of the toughest anti-fraud laws in the nation. Insurance
cheats may be fined up to $15,000 if they're caught committing fraud.
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