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Reforming New Jersey's Automobile Insurance System: Five Years Later

Auto reform anniversary report shows auto premiums drop of three straight years.

Download a copy of the ICNJ Auto Reform Report

Under AICRA, consumers have more choices with regard to their auto insurance policy. These choices give you the option to choose coverage limits that best fit your individual needs at the time you buy or renew your policy.

Consumers can choose either a "standard" auto insurance policy or a new "basic" type of policy. The new basic policy allows vehicle owners to purchase lower amounts of certain coverages than New Jersey law previously required.

A basic policy offers $15,000 in personal injury protection coverage and includes up to $250,000 of medical benefits coverage for catastrophic-type injuries, $5,000 property damage liability and an option to purchase $10,000 of bodily injury liability coverage. If you purchase a basic policy, you cannot purchase uninsured/underinsured motorist coverage. Companies can, at their option, also offer to sell collision and comprehensive coverages with this type of policy.

A standard auto insurance policy offers motorists a variety of coverage options; State law requires you to purchase certain minimum limits of three coverages:

Personal Injury Protection - PIP pays for injuries to you and your passengers, no matter who is at fault in an accident. Insurance companies must offer you up to $250,000 of coverage.
Liability Coverages - Bodily Injury Liability pays for injuries you cause to others in an accident. Under a standard policy the minimum coverage required is $15,000 for injuries to one person and $30,000 for all injuries in an accident. Property Damage Liability pays for damage you cause to others' property from an accident. The minimum required coverage is $5,000.
Uninsured/Underinsured Motorist - These coverages protect you against damages and injuries caused by drivers who are uninsured or inadequately insured. These coverages are not available under a basic policy. Minimum limits are the same as for the liability coverages and the basic deductible is $500 for property damage.
Optional Coverages - Collision coverage pays to repair your car after an accident, no matter who is at fault. Comprehensive coverage pays for auto theft, glass breakage and damage from vandalism, fire, flood and flying rocks and debris.

Consumers will also have new choices with regard to their personal injury protection or PIP benefits coverage. New Jersey law previously mandated that all policyholders purchase $250,000 of PIP benefits. PIP pays for injuries to you and your passengers, no matter who is at fault in an accident.

Under the AICRA reform law, individuals purchasing a 'standard' policy have the option of choosing various levels of coverage, $250,000, $150,000, $75,000, $50,000 or $15,000. All the options include catastrophic-type injury coverage of up to $250,000. If you do not choose among these options, you will automatically be given the standard $250,000 of coverage.

The reform law also encouraged insurance companies to develop various deductible, co-payment and pre-certification plans to combat fraud and abuse of auto insurance medical benefits. Consumers should carefully review these plans.

Another choice that insurance companies must offer is the option of purchasing this provision. If there are vehicles on your policy that certain driver(s) living in your household do not drive, you can "exclude" those drivers from having coverage on those vehicles. If the "named excluded driver operated the vehicle(s)" physical damage coverage benefits (collision or comprehensive) would not be available. The vehicle would continue to be covered under the liability and personal injury protection coverages regardless of who drives the car.