· DISCLAIMER – this is only meant to be a general discussion to aid in understanding the different options available for automobile insurance and should not be regarded or construed as legal advice. You should always consult with a professional before making any important decisions or with any specific questions.
February 14, 2020
Are you covered? Making the right choices in obtaining automobile insurance in New Jersey.
Introduction
Selecting the right automobile insurance coverage can be a very daunting task for the New Jersey consumer. There are many different types of coverages available, how do you know what is the right coverage for you? Of course we all want to save as much money as possible, but sometimes paying more, even a little more, for the right coverage will save you money in the long run, and possibly from financial ruin.
Who needs insurance? Well, if you drive an automobile in New Jersey – you do! Even if you don’t drive but own an operable automobile – it must be insured! What is the point of having insurance anyway? Insurance is something you pay for and hope never to use, but even the safest, most careful drivers must have insurance and will likely need it at some point. In New Jersey, automobile insurance serves two principal purposes: 1) In case you are injured in an automobile accident, your own insurance will pay for the medical treatment. Regardless of whose fault the accident was. 2) In case you are involved in an automobile accident where someone else is injured, they may claim you are at fault, in which case your insurance will cover their damages. (There is also the issue of covering repair of the vehicles – collision and comprehensive coverage, but we will not be discussing that here). So imagine being involved in an automobile accident without insurance in either of those scenarios – what would happen to you? In the first case, how would you pay for your medical treatment? In the second case, how would you pay to satisfy the other person’s claim against you? As you can imagine, the result in both cases could well be financial ruin.
The kinds of policies available
Let’s first look at the different kinds of policies available: in New Jersey, there are three kinds of automobile insurance policies: Standard, Basic and Special. Standard is the ‘regular’ insurance, it is the one you want. “Basic” insurance provides for little if any liability coverage and very limited medical coverage. This insurance is more than often inadequate and will leave the insured without enough coverage for medical treatment or to satisfy any claims. The whole point of having insurance is to avoid financial catastrophe, the “Basic” policy doesn’t’ do that, so even if it is cheaper, think about what you are getting in return. “Special” policies are only available to low income individuals and only provide emergency medical coverage and no liability coverage. It is, in essence, a way to have an insurance card so one can drive legally, but doesn’t afford coverage. If you have any assets, and you are driving around with Basic or Special policy, you are at risk of losing them.
So – Standard policy it is! We still have a long way to go to find the right coverage, as the typical standard policy application has many confusing options. We will discuss those now:
Personal Injury Protection (PIP) coverage
In New Jersey we have “no fault” coverage for medical care. This means that it doesn’t matter whose fault the accident was, your medical treatment is covered by your own policy. This section of your policy is called Personal Insurance Protection, or PIP for short. The standard policy used to come with $250,000.00 in PIP coverage. Now there are options for lesser coverages all the way down to $15,000.00. Like we mentioned earlier, $15,000.00 is not going to cover much. If you’re seriously injured, or not even that badly injured but still in need of treatment, MRIs, therapy, even conservative treatment, you are going to need more coverage. This can’t be stressed enough – the whole point of having insurance is to avoid financial catastrophe. So spend a little more and ensure that you will not be left saddled with medical bills if you are injured in an accident. Before you decide that you think you will be alright with less coverage, ask your insurer or broker – what is the difference in premium between the coverage limits? You might be surprised that ‘for mere pennies a day’ like they say in the commercials you can opt for the better coverage and peace of mind.
Next comes the issue of the deductible – how much will you have to pay out of pocket before the insurance ‘kicks in’? Again, the range is from $250.00 to $2,500.00. Here – less is more. You want the lowest deductible so you will have to pay that much less out of pocket. Otherwise, even the bills from the emergency room could be on you. Again - ask your insurer or broker what the difference would be in premium between the deductible limits and make the smart choice.
“Extra PIP” is another option, which you should add to your policy. It provides essential benefits (income continuation, death & funeral benefits, essential services).
“Health Care Primary” allows you to save some money by using your health insurance for treatment rather than the auto insurance. While the savings might be tempting, this means that you will not likely be getting any of the benefits you are paying for on your policy. Other problems include being limited by which doctors your health insurance allows you to use and whether your health insurance can assert a lien on your recovery from an accident claim – which means if you are due money from the other driver for injuring you, you will have to pay back the health insurance first before you receive anything. Discuss this with your health insurer and find out what the savings would be on your policy with this option, and then make an informed decision.
Lawsuit Option
This may be the most critical decision, so read carefully. It is difficult to explain the logic of this option, as it truly doesn’t make any sense. Except for the insurance industry. What this option means, which is also commonly called the “verbal threshold” or “limitation on lawsuit”, is that if you are involved in an automobile and someone else is at fault, you might not be able to make a claim against the other driver, generally in the case of ‘soft tissue’ injuries. Let that sink in for a minute. By choosing this option, you are giving up the chance to collect from someone else’s insurance company, Why would your insurance company want to sell you this option? Simple – the more people with this option, the less claims the insurance company has to pay out on. The insurance companies want to ‘save you money’ by having you choose this option. Yes, it will save you money on your insurance premium. But remember, you are buying insurance so you’ll have it if you need it. This option means that you could be badly hurt and not get anything for all your pain and suffering. So what claims would you be limited to? Only those involving the following: loss of body part, significant
disfigurement or significant scarring, a displaced fracture, loss of a fetus, a permanent injury (when the body part or organ, or both, has not healed to function normally and will not heal to function normally with further medical treatment based on objective medical proof. i.e. the injury has to show up on an X-Ray, an MRI, a nerve conduction study or the like) or death. All other injuries – no claim! From my experience, I can tell you that the vast majority of injuries suffered from an automobile accident wouldn’t get any compensation because of this option. For example, the most common injury – the rear-end hit. Your back could bother you for the rest of your life, you might not be able to lift, sit or stand for long periods of time, feel numbness or tingling in your limbs, and you might not be able to recover anything for it, because you saved a few dollars by choosing this option. As an injury lawyer, it pains me how many times I have had to tell potential clients that I might not be able to help them because they chose this option. It is frustrating for me that I can’t do my job, and it can be tragic for you to be injured and unable to get any compensation for your pain and suffering. The Limitation on Lawsuit is bad for you and bad for me. It’s good for the insurance companies, so good that they are in essence paying you to take it! Don’t fall for it! Pay a little more so that your policy is ‘worth it’!
Liability Coverage
This is a little more straightforward – you are choosing how much coverage to have available if someone sues you for injuries following an automobile accident. The coverage limits are by per person / per accident, i.e. if you are at fault in an accident involving more than one person, the total amount your insurance will pay is the per accident limit, and the they will pay any one person (even if it is the only other person involved in the accident) up to the per person limit. So why would you want more coverage than the minimum of $15,000 / $30,000? Well, if your insurance policy limit isn’t enough to satisfy the claim, you could be personally liable to pay for the damages. If you own any significant assets – a house, investments, whatever – they can be taken from you. Remember again - the whole point of having insurance is to avoid financial catastrophe. So you want to make sure that your coverage is enough to make sure that you will not be personally exposed. Of course, for some people the lower coverages might make more sense. A young twenty-something just starting a job, renting an apartment and leasing a car. No significant assets. Sure, they might be fine with a lower liability limit. Just remember what you are risking when you choose a lower limit, and – as always - ask your insurer or broker what is the difference in premium between the coverage limits so you can make the choice of coverage that makes sense for you.
Uninsured / Underinsured Coverage
Last but not least, is deciding on limits for Uninsured Motorist (UM) or Underinsured Motorist (UIM) coverage. What are UM and UIM and what is the difference between them? These are also pretty straightforward – UM coverage is for where you are in an accident with another vehicle, the other driver is at fault be he doesn’t have insurance. Are you out of luck? Without any UM coverage you would be. To put it simply (but not exactly), UM coverage means that your own insurer replaces the other driver’s liability insurance and you can collect up to the limits of your UM coverage from your own insurer. UIM coverage is for when you are in an accident with another vehicle, the other driver is at fault be he doesn’t have enough liability insurance. Let’s say you were badly injured, but the other driver has only $15,000.00 in liability coverage available, which is far less than what your pain and suffering is worth. Here the UIM coverage kicks in after you collect from the other driver, but whatever you collect counts against the coverage limits. So for example if you have $100,000.00 in UIM coverage and you were badly hurt in an accident caused by another driver who had only $15,000.00 in liability, you can collect up to $85,000.00 from your UIM coverage after the $15,000.00 from the other driver’s liability policy. Of course, the higher the coverage limits for UM/UIM the better as you will have more available if you need it. UM/UIM coverage is especially important in New Jersey as we have unfortunately many drivers on the road without liability insurance or coverage and many more with low limits of coverage. As always - ask your insurer or broker what is the difference in premium between the coverage limits so you can make the choice of coverage that makes sense for you.
Conclusion
This is merely a primer; of course if we were to go into great detail on the various issued discussed here, we would have to write a book, and many such books have been written. Hopefully, this will help you as the consumer make an informed decision to choose the right coverage for you. No one should be paying for nothing, either by paying for insurance that isn’t providing enough coverage, or paying for insurance you don’t need. Of course we are always here to answer anyspecific questions you may have.
- Daniel B. Needle