EVERYTHING
T
W
Dear New Jersey Driver,
Auto insurance is required in New Jersey. As a New Jersey driver, you have
many choices when it comes to purchasing auto insurance. Each choice you
make affects the coverage you receive and the amount you pay.
As with any major purchase, you need to understand the product before you
buy it. The New Jersey Department of Banking and Insurance has prepared
this guide to help you understand auto insurance and explain how to shop
for the coverage that best suits
your needs. Whether you are
buying a new insurance policy
or renewing your current policy,
this guide will outline how to
make choices that work for you.
It is important to remember
that you have the right to change
your coverages and policy limits
at any time, even if you are not
near your renewal date.
If you need more information
about auto insurance options,
visit the Department’s web site,
www.dobi.nj.gov, or call or
write to the Department. Contact
information is located on the
back cover of this guide.
Sincerely,
Justin Zimmerman
Acting Commissioner
Where Should You Start? .............. 1
What’s in a Policy? ......................... 2
What are the
Types of Policies?
............................ 4
What are Limits
and Deductibles?
............................. 5
Do You Want an Unlimited
Right to Sue?
.................................... 8
What is the Assigned
Risk Market? ..................................... 9
What is Tier Rating?
..................... 11
What Affects the
Cost of Auto Insurance?
...............12
What is Insurance Scoring?
.........17
What Should Every
New Driver Know?
........................21
What Should You Do
if You’re in an Accident?
.............. 24
Who is At Fault?
............................ 26
What are Your Rights?
................. 28
What is Auto Insurance Fraud?
...32
Frequently Asked Questions
........33
Table of Contents
2
Coverages — Your auto insurance policy is divided into different coverages
based on the type of claim that will be paid to you or others. (A claim is a
request to an insurer for payment or reimbursement of a loss covered by the
terms of an insurance policy.) These coverages are:
Personal Injury Protection — Otherwise known as “PIP,” this is your medical
coverage for injuries you (and others) suffer in an auto accident. PIP pays if
you or other persons covered under your policy are injured in an auto accident.
It is sometimes called “no-fault” coverage because it pays your own medical
expenses no matter who caused the auto accident. PIP has two parts — (1)
coverage for the cost of treatment you receive from hospitals, doctors and
other medical providers and any medical equipment that may be needed to
treat your injuries and (2) reimbursement for certain other expenses you may
have because you are hurt, such as lost wages and the need to hire someone
to take care of your home or family. You may purchase both parts of PIP
coverage or medical treatment coverage only, depending upon your needs.
Liability — This coverage pays others for damages from an auto accident
that you cause. It also pays for a lawyer to defend you if you are sued for
damages that you cause.
There are two kinds of liability coverage: Bodily Injury and Property Damage.
Bodily Injury Liability Coverage — Pays for claims and lawsuits by
people who are injured or die as a result of an accident you cause.
(See pages 8 and 9 for lawsuit options). It compensates others for pain,
suffering and economic damages, such as lost wages. This coverage
is typically given as two separate dollar amounts: (1) an amount paid
per individual and (2) an amount paid for total injuries to all people
injured in any one accident that you cause.
Property Damage Liability Coverage — Pays for claims and lawsuits
by people whose property is damaged as a result of an auto accident
you cause.
These coverages can sometimes be purchased as a combined single
limit, which offers a maximum limit of protection per accident of
bodily injury and property damage liability combined.
What’s in a Policy?
Insurance policies use terms that may be unfamiliar to the average driver.
It is useful to understand what these terms mean so you can make better,
more informed decisions about your coverage.
Whether you are buying a new insurance policy or renewing your current
policy, you will make many decisions about what coverage you need and how
much you can pay in premium (the amount of money a company charges for
insurance coverage). Some things to consider:
Understand Your Needs
Do you rent or own your own
home? Do you have assets to
protect (including income from
a job)? Will your own health
insurance cover auto accident
injuries? How much insurance
coverage can you afford? These
are some of the questions you
should ask yourself before
choosing a specific coverage
plan.
Understand Your Options
Use this guide to learn about
the words and phrases used in
auto policies. Know the many
coverage options. Review the
different benets of each option.
(See pages 2-9).
Understand Consumer
Protections
As a New Jersey auto insurance
consumer, you have rights. (See
pages 28-31.) You have the right
to fair and equal treatment, and
you have the right to get the
information you need to make
informed decisions.
1
Where Should You Start?
Auto insurance helps protect you and your family from losses resulting
from motor vehicle accidents. It is required in New Jersey. If you drive without
insurance, you are breaking the law!
Agents, brokers and companies
must inform you of your
coverage options when
applying for a new policy, or
at any time upon your request
if you are already insured.
You have the right to know
how each choice may affect
what you pay and what your
benets would be in the event
of an accident. You always
have the right to ask about
additional options.
You can shop for auto
insurance at any time –
not just when your policy is
up for renewal, and if you
nd a better price, you can
cancel your old policy and
seek a refund of your unused
premium.
You have the right to change
your coverages and policy
limits at any time, even if
you are not near your renewal
date. If you select options that
save you money, you have
a right to a refund of your
unused premium within 60
days.
Remember...
Standard Policy — The Standard Policy provides a number of different
coverage options and the opportunity to buy additional protection. Most
New Jersey drivers choose this policy.
Things to note if you choose the Standard Policy:
• Even if you choose one of the lower PIP limits, in some instances you
will be covered for medically necessary treatment up to $250,000 for
certain permanent or signicant injuries, regardless of your selected
limit. Amounts paid under the permanent or signicant PIP provision
will be applied to and will reduce any amount payable under the
lower PIP limit chosen.
• A minimum amount of Uninsured/Underinsured Motorist coverage
is required. You can purchase higher limits if you want more coverage,
but cannot exceed your primary liability limits.
• Comprehensive and Collision coverages are available as options of
the Standard Policy. (Some insurers may provide these options in
the Basic Policy.)
Basic Policy — The Basic Policy usually costs less than a Standard Policy, but
provides limited benets. It is not for everyone, but it does provide enough
coverage to meet the minimum insurance requirements of New Jersey law.
The Basic Policy could be an option for those with few family responsibilities
and few assets to protect (including income from a job).
4
What are the Types of Policies?
There are two common types of auto insurance policies in New Jersey —
they are referred to as Standard and Basic. Both offer options as well. The
chart on page 7 compares the differences between the policies.
What is the
SAIP?
The Special Automobile Insurance Policy
(SAIP) is a new initiative to help make limited
auto insurance coverage available to drivers
who are eligible for Federal Medicaid with
hospitalization. Such drivers can obtain a
medical coverage-only policy at a cost of
$365 a year. For more information, ask your
agent or call the New Jersey Department of
Banking and Insurance at 1-800-446-7467.
Special Policy for Medicaid Recipients Only
Uninsured Motorist Coverage — Pays
you for property damage or bodily injury
if you are in an auto accident caused by
an uninsured motorist (a driver who does
not have the minimum level of insurance
required by law). Claims that you would
have made against the uninsured driver who
caused the accident are paid by your own
policy. Uninsured motorist coverage does
not pay benets to the uninsured driver.
Underinsured Motorist Coverage — Pays
you for property damage or bodily injury
if you are in an auto accident caused by a
driver who is insured, but who has less
coverage than your underinsured motorist
coverage. When damages are greater than
the limits of the other driver’s policy, the
difference is covered by your underinsured
motorist coverage.
* Claims paid under uninsured or
underinsured motorist coverage exclude
the rst $500 in damages.
Collision Coverage — Pays for damage to your vehicle as the result of a
collision with another car or other object. Collision coverage pays you for
damage that you cause to your automobile. You can also make a claim under
your own collision coverage for damage to your
car from an auto accident you did not cause.
This may take less time than making a property
damage liability claim against the driver who
caused the auto accident. Your insurer then seeks
reimbursement from the insurer of the driver
who caused the auto accident. (See page 27.)
Comprehensive Coverage — Pays for damage
to your vehicle that is not a result of a collision,
such as theft of your car, vandalism, ooding,
re or a broken windshield. However, it will pay
if you collide with an animal.
3
What’s in a Policy?
Remember...
Comprehensive (also
known as “comp” or
“Other Than Collision”)
and Collision
coverages are not
required by law, but
may be required
under the terms of an
automobile leasing or
nancing contract.
Jane purchases $100,000
in liability coverage and
$100,000 in underinsured
motorist coverage. Sam
purchases only $25,000 in
liability coverage.
Sam crashes his car
into Jane’s car, causing
$35,000 in damages.
Sam’s insurance company
pays Jane $25,000 of
the damages, while Jane’s
insurance company pays the
remaining $10,000 (*less
a $500 exclusion) from
her underinsured motorist
coverage.
What does
Underinsured Motorist
Coverage pay for?
What are Limits and Deductibles?
6
Health Care Primary — Cost savings can also be achieved by using your
own health insurance as a primary source of coverage in the case of injury
related to an auto accident. Before selecting this option, you should nd
out if your health insurance will cover auto accident injuries and how
much coverage is provided. Medicare and Medicaid cannot be used for
the Health Care Primary Option.
Extra PIP Package Coverage — These are additional benet options
provided under the Standard Policy.
Income Continuation — If you cannot work due to accident-related
injuries, this coverage pays lost wages, less Temporary Disability
Benets you may receive if your disability prevents you from working,
up to the amount you select.
Essential Services — Pays for necessary services that you normally do
yourself, such as cleaning your house, mowing your lawn, shoveling
snow or doing laundry, if you are injured in an auto accident.
Death Benet — In the case of death, family members or estates will
receive any benets not already collected under the income continuation
and essential services coverages.
Funeral Expense Benet — Pays for reasonable funeral expenses up
to the limit you select if you die as a result of an auto accident.
Comprehensive and Collision Coverages
Deductible Options — The standard deductible for Comprehensive and
Collision coverages is $750. Higher and lower deductibles are available
as options. (Remember: Higher deductibles can reduce your premium.)
Named Driver Exclusion — Prevents certain drivers on your policy from
being covered by and charged for collision and/or comprehensive coverage
on a specic automobile. This can lower your premium, but if the excluded
driver operates the automobile for any reason and is involved in an auto
accident, you are not insured for collision and/or comprehensive coverage;
which means you could be personally responsible for damage to your own
vehicle. (Remember: This exclusion is only for physical damage coverage;
insurers are permitted to rate licensed drivers in your household who are
not insured on another policy for other coverages on your policy.)
Uninsured/Underinsured Motorist Coverage
Limit — This coverage is sold together and is available up to the selected
limits of your liability coverage.
5
Limits — The maximum dollar amount the insurer will pay following an auto
accident. Limits vary with each coverage within the policy. (See chart, page 7.)
Deductibles — Payments you have to make before the insurer pays for a
covered loss. For example, a $750 deductible
means that you pay the first $750 of each
claim. Deductibles vary by company and type
of coverage. In addition to any savings you
may realize from how much coverage you buy,
you can also save money by choosing higher
deductibles. The amount you save by selecting
a higher deductible will vary by company.
(Below you’ll find limit and/or deductible
information for the coverages discussed on
pages 2 and 3.)
Bodily Injury and Property Damage Liability Coverage
Limit — Coverages can sometimes be purchased as a combined single
limit, which offers a maximum limit of protection per accident.
Personal Injury Protection (PIP)
Deductible Options — If you feel you need a high level of PIP coverage
but want to reduce your premium, you can save money by agreeing to pay
more out of pocket through a higher deductible if you are injured in an auto
accident. Your insurer will pay the medical bills over the deductible amount
you choose. No matter what deductible you choose, there is a 20 percent
co-payment for medical expenses between the deductible selected and
$5,000. That means you pay 20 percent, and your insurer pays 80 percent.
What are Limits and Deductibles?
In addition to choosing coverage options, you must choose the amount of
coverage you want to buy and the amount you are willing to pay out of
pocket in the event of an accident.
What is a Deductible?
John has a car
accident. His repair
shop estimates the
cost of repairs at
$2,000. John pays
$750 of the bill (his
deductible) and his
insurance company
pays the remainder.
Sam and Jane each have an accident that results in $10,000 of medical
expenses. Sam chose the minimum $250 deductible. He pays the $250
deductible plus $950 (20 percent of the $4,750 that is left of the rst
$5,000) and the insurer pays the remaining $8,800). Jane chose the
$2,500 PIP deductible for a 25 percent reduction in the PIP premium.
She pays the rst $2,500 as the deductible. She also pays $500 (20
percent of the $2,500 that is left of the rst $5,000) and the insurer
pays the remaining $7,000.
Example
8
Do You Want an Unlimited Right to Sue?
For the Standard Policy, you must make a choice about the rights you will
have if you are injured in an automobile accident. The Basic Policy includes
the Limited Right to Sue option.
The choice you make affects how much your
insurance will cost and what claims will be
paid in the event of an accident.
The choice you make regarding your right to
sue another driver applies to you, your spouse,
children and other relatives living with you
who are not covered under another automobile
insurance policy.
The Unlimited Right to Sue and Limited
Right to Sue options (see page 9) only cover
lawsuits for “pain and suffering” or non-
economic losses. Your medical expenses and
some economic losses for injuries in auto
accidents will be paid up to the limits of your
PIP coverage and are not affected by the choice
you make here.
WARNING:
Insurance companies or their producers or
representatives shall not be held liable for your
choice of lawsuit option (
Limited Right to Sue
or
Unlimited Right to Sue) or for your choices
regarding amounts and types of coverage.
You cannot sue an insurance company or its
producers or representatives if the Limited Right
to Sue option is imposed by law because no
choice was made on the coverage selection form.
Insurers and their producers or representatives
can lose this limitation on liability for failing
to act in accordance with the law. See N.J.S.A.
17:28-1.9 for more information.
Remember...
Choosing the
Limited Right to
Sue option will
save you money,
but will limit your
right to sue the
person who caused
an auto accident
for pain and
suffering.
You have an
important
decision to
make
regarding the
Right to Sue
7
TYPE OF
COVERAGE
STANDARD
POLICY
BASIC
POLICY
BODILY
INJURY
LIABILITY
(PAGE 2)
As low as:
$25,000 per person,
$50,000 per accident
As high as:
$250,000 per person,
$500,000 per accident
Coverage is not
included, but $10,000
for all persons, per
accident, is available
as an option
PROPERTY
DAMAGE
LIABILITY
(PAGE 2)
As low as:
$25,000 per accident
As high as:
$100,000 or more
$5,000 per accident
PERSONAL
INJURY
PROTECTION
(PIP)
(PAGE 2)
As low as:
$15,000 per person
or accident
As high as:
$250,000 or more
Up to $250,000 for
certain injuries* regardless
of selected limit
$15,000 per person,
per accident
Up to $250,000 for
certain injuries*
UNINSURED/
UNDERINSURED
MOTORIST
COVERAGE
(PAGE 3)
Coverage is available up
to amounts selected for
liability coverage
None
COLLISION
(PAGE 3)
Available as an option Available as an option
(from some insurers)
COMPREHENSIVE
(PAGE 3)
Available as an option Available as an option
(from some insurers)
The chart below compares the differences between the Standard
and Basic policies and explains the amounts of coverage you may
be able to purchase from an insurer.
*permanent or signicant brain injury, spinal cord injury or disgurement or for
medically necessary treatment of other permanent or signicant injuries rendered
at a trauma center or acute care hospital immediately following an accident and
until the patient is stable, no longer requires critical care and can be transferred in
the judgment of the physician.
10
What if you have seven or more insurance eligibility points?
In accordance with New Jersey regulations for Eligible Person
Qualications, any driver who has accumulated seven or more insurance
eligibility points for the three-year period immediately preceding the
application for insurance or the three-year period ending 90 days prior to
renewal of a policy may not be considered eligible to purchase coverage
in the voluntary market. As a result, some insurers will direct them to
purchase insurance through the Personal Automobile Insurance Plan
(PAIP). It is important to note, however, that not all insurers in the
voluntary market refuse to cover drivers with seven or more insurance
eligibility points. If you have seven or more insurance eligibility points
it may be a good idea to shop around and compare your coverage and
pricing options.
The PAIP is not an insurance company; instead, it acts as an administrative
clearinghouse and assigns each driver to a company for coverage.
Therefore, this type of coverage is referred to as “assigned risk.” The state
has standardized the rates for this type of coverage and they do not vary
from company to company. The rates may also be substantially higher than
rates in the voluntary market. To nd PAIP producers in your area, call
1-800-652-2471 or visit the Department’s web site, www.dobi.nj.gov.
How do you get out of the assigned risk market?
Each year when a policy comes up for renewal or upon the purchase of
a new policy, the insurer will review a driver’s record for the preceding
three-year period. Insurance eligibility points for a violation or accident
are dropped when the incident falls outside the three-year “look back”
period. Once your point total falls below seven, you will again become
eligible to purchase insurance in the voluntary market.
What is the Assigned Risk Market?
How Do You
Get Insurance
Eligibility Points?
Insurers assign points for driver inexperience,
motor vehicle violations, suspensions and at-
fault accidents.
For example, if you are found equally or
more at fault than any other driver involved
in an accident and your insurance company
pays a claim of $1,000 or more ($500 or
more for accidents occurring before June 9,
2003), ve insurance eligibility points will
be assigned to you.
Unlimited Right To Sue — Under the No Limitation on Lawsuit Option,
you retain the right to sue the person who caused an auto accident for pain and
suffering for any injury.
Limited Right to Sue — By choosing the Limitation on Lawsuit Option, you
agree not to sue the person who caused an auto accident for your pain and
suffering unless you sustain one of the permanent injuries listed below: (Choosing
this option does not affect your ability to sue for economic damages such as
medical expenses and lost wages.)
• loss of body part
• signicant disgurement or signicant scarring
• a displaced fracture
• loss of a fetus
• permanent injury (Any injury shall be considered permanent
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.)
• death
Do You Want an Unlimited Right to Sue?
A driver is considered eligible to purchase insurance in the voluntary market
if he or she has fewer than seven insurance eligibility points accumulated
during the preceding three years. These points are not the same as those
on your driving record maintained by the New Jersey Motor Vehicle
Commission. Insurers assign insurance eligibility points to drivers for motor
vehicle violations, suspensions and at-fault accidents. Insurers also assign
every newly licensed driver, regardless of gender or age, three insurance
eligibility points for being an inexperienced operator. (See page 21.) These
points are merely used as a guide to help the company determine whether
you are eligible for auto insurance in the voluntary market.
9
What is the Assigned Risk Market?
In New Jersey, there are two separate insurance markets — the “regular”
or voluntary market, and the “residual” or assigned risk market.
12
When you apply for auto insurance, companies consider a variety of factors
to determine the risk you represent and the likelihood that you will experience
an accident or loss. The company then groups you with policyholders with
similar risk characteristics (i.e., tiering), and assigns a rate based on the
driving and claims history of your risk group. Not all companies consider
the same factors when determining your premium (the amount you pay for
insurance coverage), but there are some common factors that impact rates:
Driving Record
If you (or a member of your household) have a driving record that includes
motor vehicle violations, suspensions and/or at-fault accidents, the price
you pay to obtain insurance might be higher. Insurance companies may
consider you (or a member of your household) to be a high-risk driver
and charge a higher rate than a driver with a “clean” record (free of
accidents and violations). Each company has underwriting guidelines to
determine what type and how many accidents and violations during a
specic period constitute a high-risk driver. (Remember: Insurers assign
insurance eligibility points for accidents and violations, and having
seven or more may make it difcult to remain in the voluntary market.)
Vehicle Type
The make, model and value of your vehicle affects the cost of your auto
insurance premium. Generally, an older vehicle will cost less to insure,
while a high performance or luxury car will cost more. The cost to insure
different makes and models of vehicles can vary among insurers, so be
sure to check with several insurers to get the best price and coverage
for your needs. Companies may offer discounts for vehicles with safety
features, so check with your insurer or producer for details, especially
when you are considering purchasing a vehicle.
Geographic Area
Where you drive and keep your vehicle also inuences your premium.
The number of claims led by policyholders in your territory will affect
the rates charged by insurance companies.
What Affects the Cost of Auto Insurance?
Auto insurance rates vary from company to company, driver to driver, car
to car, and coverage to coverage.
11
Under the tier rating system, insurers assign drivers to different tiers, or rating
levels, based on a number of risk characteristics. Tier rating systems take the
“complete picture” into account to identify a good risk, rather than simply
penalizing drivers for accidents and motor vehicle violations.
What factors determine what tier I’m in?
Insurers can consider a number of risk characteristics, including driving
record, years of driving experience, vehicle type, coverage limits, claims
and credit history when determining a driver’s tier placement. Other
factors, like age, gender and marital status, may also impact an individual’s
rate within a specic tier.
Do all companies use the same tier characteristics?
No. For example, some insurers use an “insurance score” (see page 17)
based on a driver’s credit history, while others may emphasize factors such
as driving record and claims history. Insurers are permitted to establish
their own tier rating criteria as long as they can show that they are not
arbitrary, capricious or unfairly discriminatory. Insurers also have to show
that tiers are reasonably based on loss experience — meaning that the
guidelines they use to place drivers in specic tiers are substantiated by
the losses the companies actually incur.
How many tiers can a company have?
Tier systems can vary greatly from company to company. Auto insurers
have developed a number of ways to evaluate risk; risk characteristics
considered important to one insurer don’t necessarily carry the same
weight with another. This makes it important for consumers to shop
around, as insurers’ tier systems and rates can vary considerably.
What is a “standard” tier?
A “standard” tier is a tier that represents the company’s base rates. Drivers
with favorable risk characteristics may qualify for preferred or lower-
rated tiers, while drivers with less favorable risk characteristics may be
placed in higher-rated tiers.
What is Tier Rating?
The Automobile Insurance Cost Reduction Act of 1998 (AICRA) changed the
way insurance companies do business in New Jersey by creating a tier system
to determine rates.
What Affects the Cost of Auto Insurance?
14
While some of the
factors used by
insurers to determine
risk are out of your
control (i.e., gender,
age), you do have
control over a variety
of factors that
inuence the cost of
your insurance.
Before you
purchase
auto insurance,
check out:
How Can You Lower Your Premium?
Your Collision and Comprehensive
Deductibles — In many cases, consumers
can save premium dollars by choosing higher
deductibles or eliminating coverage for older
cars that are paid in full. Remember, a higher
deductible means you will pay more out of
pocket in the event of an accident. You will
need to decide how much you can afford to
pay if an accident occurs.
Your Auto-Related Health Insurer Option
— Consumers can save premium dollars by
choosing their health care insurers as primary
in the case of auto accident-related injuries.
It is important to check with your health
care insurer before choosing the Health Care
Primary option.
Your Personal Injury Protection (PIP)
Deductible and Limits — Standard policies
usually carry a deductible of $250 and
a PIP limit of $250,000. Consumers can
save premium dollars by choosing a higher
deductible of $500, $1,000, $2,000 or $2,500
and/or choosing one of the lower PIP limits
of $15,000, $50,000, $75,000 or $150,000.
Your Lawsuit Option — Consumers can save
premium dollars by choosing the Limited Right
to Sue (Limitation on Lawsuit Option), which
limits suits for pain and suffering except in
cases of death or permanent injury.
Are You Eligible for Discounts? — It is always
a good idea to ask your insurer if any discounts
may be available to you. The following are
some of the discounts insurers may offer and
to which you may be entitled:
(For more
information
about the
coverages listed
at right, see
pages 2-9).
13
Gender and Age
Statistics show that males and young adults have a higher incidence of
accidents and claims; therefore, your gender and age can affect your rate.
Marital Status
Statistically, young married couples tend to have a lower incidence of
accidents and claims; therefore, they generally pay lower premiums than
single people.
Vehicle Use
The distance you live from work or school may affect the cost of your
insurance, as it determines your daily exposure to risk. Insurers will
calculate your premium based on the average distance you drive on an
annual basis or how far you commute to work or school. Whether you
use your vehicle for personal or business use may also impact your rate.
Policy Changes
Changes to your policy can also affect your premium. Such changes
may include:
• Adjusting your coverage
• Changing your deductibles
• Moving to a new area (territory)
• Adding or removing a vehicle from your policy
• Adding a new driver
Any time period in which you had a car that was required to be insured
but did not have auto insurance can affect your premium as well. A lapse
in coverage exceeding 30 days could place you in the assigned risk
market. By law, any vehicle registered in the state must have insurance,
so if your car is off the road or not operational and you let your insurance
lapse, it is important to surrender your license plates to the New Jersey
Motor Vehicle Commission to be sure you do not have an uninsured
registered vehicle.
Insurance Score
Some, but not all, insurers in New Jersey will use an insurance score
based on your credit history as one of the factors in determining risk.
(See page 17.)
What Affects the Cost of Auto Insurance?
What Affects the Cost of Auto Insurance?
16
The key to getting the most out of your premium dollars is to comparison
shop among insurers. Before you start shopping, consider what insurance
coverage you need, then compare how much the same coverage would cost
from several insurers.
Comparison shopping takes time, but the effort may result in a lower premium
since different companies charge different rates for identical products and
services. Some companies employ agents or brokers to sell policies, while
others sell policies directly through the mail or their web sites.
Agents, brokers and companies must inform
you of your coverage options when applying
for a new policy, or at any time upon your
request if you are already insured. You have
the right to know how each choice may affect
what you pay and what your benets would
be in the event of an accident. You always
have the right to ask about additional options.
When shopping for insurance, you should
also consider an insurer’s reputation for
nancial stability, policyholder service and
claims handling practices. Many insurers
offer information about their services on
their web sites, and companies such as A.M.
Best (www.ambest.com), Moody’s (www.
moodys.com) and Standard & Poor’s (www.
standardandpoors.com) rate the nancial
condition of insurers.
As the regulatory authority for the state’s
insurance industry, the Department cannot
recommend insurers to consumers. However,
the Department’s web site (www.dobi.
nj.gov) offers many shopping tools, as well
as a current list of insurance companies that
write policies in New Jersey.
How to Shop for Auto Insurance
Try the Department’s
online tool, the
Auto Insurance
Purchasing Planner
(www.dobi.nj.gov/
autoplanner.htm).
This interactive tool
guides you through the
coverage selections that
must be made when
purchasing an
auto policy.
You can print out
information about the
types of coverage that
are right for you and
use it when speaking to
an agent or insurance
company.
Before You Shop...
What Affects the Cost of Auto Insurance?
15
In order to accurately quote you a premium, insurers will generally request
the following information:
• Make/model/year/vehicle identication number (VIN) of vehicle(s)
• Number of average annual miles (daily miles to work or school)
• Principal owner and operator of vehicle(s) (registration information)
• Driver(s) to be insured on the policy – name, license number, age,
sex, marital status (It is important to tell your insurer about all
licensed drivers in your household, even if they are covered by other
policies)
• Accidents or moving violations of each driver during past three years
• Coverages and limits desired
• Multiple Car/Other Policies — Insuring two or more vehicles on one
policy can reduce your premium. Discounts may also apply if you have
another policy, such as homeowner’s, renter’s or life insurance, with
the same company.
• Vehicle Safety Features — Insurers must offer discounts for vehicles
that have anti-lock brakes, air bag and passive restraint systems, and
anti-theft vehicle recovery systems.
• “Good Student” — Many insurers offer discounts for young drivers
who maintain a 3.0 (“B”) or higher grade point average or for those
family members attending school away from home.
• Defensive Driving — New Jersey law requires insurers to offer
discounts for drivers who have completed a Defensive Driving course
approved by the New Jersey Motor Vehicle Commission. (To nd an
approved school near you, call 1-888-486-3339.)
What Information May an Insurer Request?
What is Insurance Scoring?
18
How is insurance scoring different in New Jersey?
The New Jersey Department of Banking and Insurance examined the
practice of insurance scoring in more than 40 states to help craft a
comprehensive approach that will protect consumers and encourage
competition. Consumer safeguards include:
CANNOT:
Use an insurance score to deny, cancel or non-renew coverage
Use an insurance score for consumers covered by the Special
Automobile Insurance Policy or Basic Policy programs
Use an insurance scoring model that considers race, ethnicity,
sex, age, religion, income, address or unpaid medical bills
Offer less favorable payment plans based on credit
MUST:
Provide written notice to applicants and existing policyholders
of the practice and factors that affect the scoring
Provide written notice and specific explanations if an
“adverse action” is taken against the applicant, in whole or
in part, because of their credit history
Consider multiple credit inquiries for home or auto loans as
one inquiry if requests were made within a 30-day period
Make exceptions for consumers whose credit has been
directly inuenced by extraordinary life events, such as
catastrophic illness, injury, death of spouse, child, or parent,
temporary loss of employment, divorce or identity theft (An
insurer may only consider credit information not affected
by the event)
Protect existing customers who have been claim and violation
free in their company for seven years
Protect consumers without a credit history
Submit their scoring model to the Department and fully
disclose the factors used in establishing the model, as well
as its statistical justication
Auto
insurance
companies
that use
insurance
scoring...
17
Some auto insurance companies in New Jersey are now using your insurance
score as one of the various factors to evaluate risks and assign rates. An
insurer may use your insurance score, based on information contained in
your consumer credit reports, in conjunction with your motor vehicle records,
loss reports and application information to determine your insurance risk at
a particular point in time.
In New Jersey, insurers are prohibited from using your insurance score
to deny, cancel or non-renew coverage.
How much do you know about your credit history?
Your credit history plays a major role in many
aspects of your life. How you manage credit is
considered when you apply for home or auto loans,
and when establishing utility, cable or telephone
services. Few landlords will rent apartments
or houses without ordering a credit report. It is
sometimes considered even when applying for
a job. Because the use of credit information is a
fact of life today, it is important to understand and
manage your credit wisely.
Why is insurance scoring being used?
A common practice in most states, insurance scoring, like other rating
criteria, is a way for insurers to differentiate between insurance risks.
Insurance scores are used by insurers to determine a consumer’s likelihood
to le claims.
What is the difference between a credit score and an insurance score?
While a credit score and an insurance score are both derived from
information contained in your credit report, they predict very different
things. A credit score is used by banks and mortgage lenders to predict the
likelihood that a person will repay a loan or some form of credit debt. An
insurance score is used by insurance companies to predict a consumer’s
likelihood to le claims.
What is Insurance Scoring?
In 2003, the use of insurance scoring was introduced to New Jersey as yet
another step in providing auto insurance consumers with more choices in
companies, products and price.
While a credit
score and an
insurance score are
both derived from
information contained
in your credit report,
they predict very
different things.
Remember...
• Make a realistic saving and spending plan and stick to your budget.
You are responsible for what you borrow. Examine your nancial
situation to make sure you are able to repay your debt.
• Check monthly statements and report inaccuracies or mistakes
immediately.
• Annually request a copy of your credit report. Review for accuracy
and correct all errors in writing. Over time, responsible use of credit
can improve a customer’s insurance score.
Know your credit history
There is a good chance your current or prospective insurance company
will consider nancial stability as part of its rating process. Insurance
scores are based on information from credit reports from the three
major credit reporting agencies (see below). It is important to review
your credit history and correct any errors. New Jersey and federal law
entitles consumers to a free report each year from each of the major credit
reporting agencies.
The federal Fair Credit Reporting Act requires an insurance company to
tell you if they have taken an “adverse action” against you, in whole or
in part, because of your credit history. If your insurance company tells
you that you have been adversely affected, they must also tell you the
name of the credit reporting agency that supplied the information so you
can get a free copy of your report and correct any errors.
What is Insurance Scoring?
20
You should review your credit
report from each credit reporting
agency at least once a year.
Get your free reports online at
www.annualcreditreport.com
or by calling
1-877-322-8228.
How Can You Get Your
Free Credit Report?
You can also contact the
agencies directly:
Equifax: 1-800-685-1111
Experian: 1-888-397-3742
TransUnion: 1-800-888-4213
Where does an insurance score come from?
Most insurance companies do not directly participate in the process
of developing a consumer’s insurance score. Insurers generally hire a
vendor to look at the information provided by major credit bureaus, and
use it to develop an insurance score for you. The vendor then gives your
score, not your credit report, to the insurer. Insurance scores vary by
company due to the information provided and the vendor formula used
to calculate the score.
What factors can affect your insurance score?
There are a number of factors that determine insurance scores. One insurer
might place more weight on a certain factor while another insurer might
not consider it at all. Following is a list of common factors:
• Major negative items — Bankruptcy, collections, foreclosures, liens,
etc.
• Past payment history — Number and frequency of late payments.
• Length of credit history — Amount of time you have been in the
credit system.
• Inquiries for credit — Number of times you’ve recently applied for
new accounts, including mortgage loans, utility accounts, credit card
accounts, etc.
• Number of open credit lines — Number of open credit cards, whether
you use them or not.
• Type of credit in use — Major credit cards, store credit cards, nance
company loans, etc.
• Outstanding debt — How much you owe compared to how much
credit is available to you.
What can you do to improve your insurance score?
• Pay bills on time. Delinquent payments and collections can have a
major negative impact on an insurance score.
• Use credit wisely. High outstanding debt can affect an insurance score.
• Apply for and open new credit accounts only as needed. Maintain
only the minimum number of credit cards and other credit accounts
necessary.
• Remember that the longevity of an account (the amount of time
you’ve had it) is considered part of your credit history.
What is Insurance Scoring?
19
What Should Every New Driver Know?
22
New Jersey
Statutes
Annotated
Event
Description
Moving
Violation
Points
Inexperienced
Driver
Assessment
Total Insurance
Eligibility
Points
39:4-50
Operating a motor
vehicle under the
influence of alcohol
or drugs
9 3
12
39:4-52
Racing on highway
5 3
8
39:4-96
Reckless driving
5 3
8
39:4-99
Exceeding
maximum speed
15-29 mph over
limit
4 3
7
39:4-128.1
Improper passing
of school bus
5 3
8
39:4-129
Leaving the scene
of an accident -
Personal Injury
8 3
11
When do parents have to add a teenager to their auto policy?
You should notify your parents’ insurer when you are ready to obtain
your driving permit. Any change in their insurance cost will either
apply when you receive a permit or license, depending on the insurance
company’s rating plan. (Remember: Failure to disclose all of the drivers
in a household to your insurer can be construed as a form of insurance
fraud - see page 32, which is subject to policy cancellation, civil ne,
or penalty under the New Jersey Insurance Fraud Prevention Act.)
Most insurers offer discounts for multiple cars, so it will most likely
cost less for a young driver to be added
to their parents’ policy than to purchase
their own. However, any driver with
a car titled and registered in their
name can purchase insurance.
Check with your agent, broker or
insurance company to understand
the factors to consider when
making such a decision.
21
What Should Every New Driver Know?
Getting the keys to your rst car (even if it belongs to your mom or dad!) is
considered a rite of passage by many teenagers. With this important step
toward adulthood comes many responsibilities — insurance being one of them.
Following are questions teenage drivers and their parents should consider
when shopping for auto insurance.
Why are insurance rates higher for teenagers?
According to the National Safety Council, young drivers as a group are
involved in more car accidents than any other driver age group. Lack of
experience, higher accident statistics and more costly accidents result
in higher insurance rates for novice drivers, especially those under 25.
But there is some good news: As long as drivers maintain good driving
records, auto insurance rates tend to decrease with age.
What are inexperience points?
Every newly licensed driver, regardless of gender or age, is assigned three
insurance eligibility points for being an inexperienced operator. (See
page 9.) For every year of experience, one inexperience point is removed.
If you start out with three insurance eligibility points, you have little
room for error if you want to remain in the voluntary market. If you
have seven or more insurance eligibility points upon renewal of your
policy, you and possibly your family may have to seek coverage in the
assigned risk market.
If you commit any of the following
motor vehicle offenses (see chart
on page 22) during the rst year of
your three-point assessment, upon
renewal you may have to purchase
insurance in the assigned risk market.
In addition, for Driving Under the
Inuence (DUI) offenses, you could
face a delay in getting your license,
suspension of your license and/or nes
and surcharges.
Remember...
Every newly licensed
driver, regardless of
gender or age, is assigned
three insurance eligibility
points for being an
inexperienced operator.
With each year of driving
experience, the driver
loses one inexperienced
operator eligibility point
until he or she is licensed
for three years.
The following tips can help you before, during and following an accident.
Before an Accident
Make sure you are sufciently insured – Read your policy carefully
to understand the types of coverage you have purchased and the
limits of your coverage. Discuss with your agent or broker what your
benets would be in the event of an accident.
Keep your insurance information (and vehicle registration)
available at all times –You will be required to present your license,
proof of insurance and registration if you are involved in an accident
or trafc stop. (Keep a disposable camera with your insurance
information – Use it to take pictures at the scene of an accident,
including any damage to vehicles and the number of people involved.)
Look for a reputable repair shop – Establish a good working
relationship with a repair facility before you need one. You can choose
your own licensed repair shop, and insurance law requires that the
insurance company attempt to reach an agreement with it regarding
the cost to repair your vehicle. If not, the insurance company is
obligated to identify other licensed shops that can make repairs at
the price determined.
At the Scene of an Accident
Stop the vehicle and remain at the scene – If possible, move out
of the way of oncoming trafc, but do not leave the area. Switch
on emergency ashers and put out ares, if possible, to alert any
oncoming trafc.
Call the police – Report the accident and if necessary, request medical
assistance.
Obtain information – If possible, write down the following:
24
What Should You Do If You’re In an Accident?
Whether you are involved in a minor fender bender or serious collision, an
auto accident is a stressful experience for any driver. It is important to try
to remain calm and know what to do.
What Should Every New Driver Know?
23
Will a parents’ auto policy cover a student away at college?
In general, young people away at college are still considered members of
their parents’ household and would be covered while driving their own
or other autos. As such, you should advise your insurer of your location
and current use of vehicles insured under the policy. If you bring your
car with you to school, you will need to notify the insurer that the car
will be garaged at another location. However, if you’ll be away at school
and won’t have access to a car, you may want to ask your insurer about
possible discounts for students living away from home and the Named
Driver Exclusion endorsement (see page 6).
How can teenage drivers save money on auto insurance?
• Shop around — Since premiums vary from company to company, it
is important to shop around.
• Enroll in driver training — Many schools offer driver training as part
of their curriculum. Check with your insurer if any discount will apply
if you complete a program that includes behind-the-wheel training as
well as classroom instruction.
• Keep your grades up — Many insurers offer “Good Student” discounts
for young drivers who maintain a 3.0 (“B”) or higher grade point
average or for those family members attending school away from home.
Check with your insurer.
• It’s all about the car — The make and model of your vehicle affects
the cost of your auto insurance premium. Generally, an older vehicle
will cost less to insure, while a high performance or luxury car will
cost more. The cost to insure different makes and models of vehicles
can vary among insurers, so be sure to check with several insurers to
get the best price and coverage for your needs. Companies may offer
discounts for vehicles with safety features, so check with your insurer
or producer for details, especially when you are considering purchasing
a vehicle.
• Choose a higher deductible — You may reduce your insurance
premium by selecting higher deductibles (see pages 5 and 6).
(Remember: A deductible is the amount you pay out of pocket in the
event of an accident.)
26
Who is At Fault?
In New Jersey, if more than one driver contributes to an accident insurance
companies will pay physical damage and other liability claims according
to the percentage of fault for each driver involved.
Who decides who is at fault in an accident?
Insurance companies determine each driver’s degree of fault in an
accident using the Comparative Negligence Act (N.J.S.A. 2A:15-5.2).
The amount, or percentage, of fault is determined on a case by case basis
depending on the circumstances surrounding the accident and is used to
determine liability for physical damage and other liability claims. Under
the law, an individual cannot recover damages if his or her percentage of
fault for the accident is greater than the individual from whom damages
are sought.
In the event of an accident, the insurer will conduct an investigation and
review all the facts provided by each party (such as police reports, driver
and witness statements, etc.). It will then assign a percentage of fault to
the parties involved in the accident based on contributing factors such as:
failing to observe and avoid another vehicle, failing to sound the horn,
apply brakes or swerve, and/or driver inattention.
If you are found to have a portion of fault for an accident, any payment
or reimbursement you may receive from the other driver’s insurer will
be reduced by that portion.
If you were considered 50 percent at fault for the
accident and had $1,000 in damage to your car, you
would be paid $500 or 50 percent by the other driver’s
insurance company. If in the same accident you were
only considered 10 percent at fault, you would receive
$900 from the other driver’s insurance company.
If you have an accident where you believe you are not at fault and have
collision coverage on your vehicle, you have the option of ling with your
own insurance coverage or directly with the person you believe is at fault.
If you are paid under your own policy minus your collision deductible,
your insurer will try to pursue reimbursement from the at-fault person. If
your insurer is successful, it will reimburse you the proportionate share
of your deductible.
For
example:
What Should You Do if You’re in an Accident?
25
• Insurance information (including company and policy number) for
each vehicle involved in the accident
• Make and model of the vehicles involved in the accident
• Time, date, location, weather and road conditions
• Direction and speed of drivers involved
• How the accident occurred
• Names, addresses and phone numbers of any witnesses to the
accident
• Names, badge numbers of police ofcers or emergency personnel,
and instructions on how to obtain a copy of the police report
After an Accident
Contact your insurance company as soon as possible – Ask your
insurer what forms or documents will be needed to support your claim.
Current regulations require your company to contact you within 10
working days after it has been notied of a loss; or, within seven working
days if it intends to inspect the damaged vehicle. This inspection must
be done at a time and place that is reasonably convenient for you. For
your own protection, you should contact your insurance company even if
you believe you were not at fault in an accident, or if there is no visible
damage or injury.
Get a copy of the police report – Make copies for your own records
and your insurance company. Review report for details, such as how
many passengers were listed in comparison to how many were present
at the accident. If you see inconsistencies, let your
insurance company know and contact the police
department that responded to the scene.
Take reasonable steps to protect your property from
further damage – For example, if you don’t cover a
broken windshield and rain damages your upholstery,
your insurer could refuse to pay for the damaged
upholstery. Save all receipts for emergency repairs
and submit with your claim.
What are Your Rights?
As a New Jersey driver, you have certain rights and responsibilities regarding
the purchase of auto insurance. Knowing these rights will allow you to get
the most from your insurance coverage.
28
You Have the Right to Purchase Insurance
You can never be denied auto insurance based on your gender, race or
ethnicity. In most circumstances, a company cannot refuse to sell you
insurance based on where you live as long as you meet the company’s
acceptance criteria*.)
If you are denied auto insurance coverage, the agent or company must state
a reason. Common reasons include:
• You do not meet any of the company’s acceptance criteria*.
• The insurer is a “membership company” that only covers certain cat-
egories of drivers.
• The Department of Banking and Insurance has permitted the insurer
to stop writing new policies.
You Have the Right to Cancel or Change Insurance
You can shop for cheaper auto insurance at any time – not just when your
policy is up for renewal. If you nd a better price, you can cancel your old
policy and seek a refund of your unused premium. However, never cancel
your old policy until a new one is in effect. A lapse in coverage will result
in higher rates in the future.
You have the right to change your cover-
ages and policy limits at any time, even
if you are not near your renewal date. If
you select lower policy limits or cancel
nonmandatory coverages to save money,
you have a right to a refund of your unused
premium within 60 days.
*Acceptance criteria are the written
standards by which a company ac-
cepts new business or renews existing
business.
27
Who is At Fault?
You le a claim with your insurer for $2,000 in damage
under collision. After applying your $750 collision
deductible, your insurer pays you $1,250. The insurer
pursues subrogation (reimbursement) from the at-fault
person’s insurance company and recovers 80 percent of the
loss. Your insurer will reimburse you 80 percent of your
deductible, or $595, for a total payment on your claim of
$1,845. If you led the claim directly with the at-fault
person’s insurance company rather than under collision,
you would be paid 80 percent of $2,000 or $1,600.
You should also be aware that your percentage of fault will be considered
when reimbursing you for other accident-related costs, such as rental car
charges. However, if you are found to be more at fault than the other
driver, (i.e., if you were 80 percent at fault and the other driver was 20
percent at fault), you would not be entitled to collect damages from the
other driver’s company.
What if you disagree with the percentage
of negligence assigned to you?
All auto insurers must have an Internal
Appeal Process in place for the review
of disputed claims. In the event that a
settlement cannot be reached through the
Internal Appeal Process, the company
must inform the claimant of their right
to contact the Department’s Office of
Insurance Claims Ombudsman to request
a review of the claim and the appeal
determination. (For contact information,
see the back cover of this guide.)
However, police report details or opinions
and extenuating circumstances exist for nearly every accident and there
are times when a dispute between the drivers involved as to how an
accident occurred cannot be resolved. In this situation, determining
the facts of the accident would be up to a court of law. It should be
remembered that ling an internal appeal or a complaint through the
Department does not negate your right to le suit to ultimately resolve
the claim dispute. Consult an attorney or your County Court Clerk for
more information on ling a lawsuit.
For
example:
Remember...
Under the law, in
order to recover
damages from
another person or his
insurance company,
an individual’s
percentage of fault
for the accident
cannot be more than
the individual from
whom damages are
sought.
What are
Acceptance
Criteria?
30
You Have the Right to Appeal
If your coverage is canceled, you can le an appeal with the New Jersey
Department of Banking and Insurance. Contact the Consumer Inquiry and
Response Center, P.O. Box 471, Trenton, NJ 08625-0471, call (609) 292-
7272 or 1-800-446-7467, or visit online at www.dobi.nj.gov/consumer.
htm. The Department cannot guarantee that your policy will be reinstated,
so you should not delay shopping for alternate coverage.
If a carrier denies you coverage and does not state a reason, or if you believe
you have been treated unfairly, you can contact the Department.
You Have the Right to a Notice of Non-renewal
Insurers can decline to renew coverage if you no longer meet any of the
company’s acceptance criteria*. This can occur when a driver’s record
includes “at-fault accident” or motor vehicle violations. Other reasons for
nonrenewal of a policy include:
• The Department has, for regulatory reasons, permitted the company
to non-renew policies.
• The insurer is using the 2-for-1 or the 2 percent rule. The 2-for-1
rule allows the insurer to non-renew one vehicle for every two new
ones it writes in each territory. The 2 percent rule allows the insurer
to non-renew up to 2 percent of policies in a territory experiencing
heavy growth. Drivers subject to non-renewal do not have clean
driving records or have a poor payment history. Insurers must state
that they have invoked these rules on the non-renewal notice.
A written non-renewal notice must
be sent at least 60 calendar days prior
to the expiration date of the existing
policy.
*Acceptance criteria are the written
standards by which a company
accepts new business or renews
existing business.
What are Your Rights?
29
You Have the Right to Choices
Agents, brokers and companies must inform you of your coverage options
when applying for a new policy, or at any time upon your request if you are
already insured. You have the right to know how each choice may affect
what you pay and what your benets would be in the event of an accident.
You always have the right to ask about additional options.
You Have the Right to a Timely Response
You have the right to a timely response when seeking an appointment
or application from an agent, broker or company. Appointments should
be scheduled so that you can obtain
coverage before your current policy
expires. However, an application is usually
not considered complete until the company
has obtained all pertinent information,
including a copy of the applicant’s driving
record from the Motor Vehicle Commission
and verication of any previous coverage.
Therefore, the overall application process
can take up to two weeks. Make sure you
give yourself enough time to shop for
coverage.
You Have the Right to the Prompt and Fair Handling of Claims
You have the right to ask about any payments made to others by your
company and charged to your policy. If you le a claim, it should be
handled promptly and fairly. If a claim is denied, you must receive a
written explanation for the denial.
You Have the Right to a Notice of Cancellation
There are specic circumstances that allow an insurance company to
cancel your policy during the policy period. This is referred to as a mid-
term cancellation. This may only occur when fraud is discovered, when
your driver’s license is suspended or when the policyholder fails to make
premium payments. A 15-day warning notice must be sent before the policy
is canceled.
What are Your Rights?
32
Frequently
Asked Questions
There are many types of fraudulent schemes and scams, all of which increase
premiums for policyholders of auto, life, health, homeowner’s and other types
of insurance. Insurance fraud can be “hard” or “soft.”
Soft fraud occurs when normally honest people knowingly misrepresent facts
on insurance applications or “pad” a claim with damages and injuries that
never occurred. Some examples:
• Understating the annual number of miles driven on an insurance
application to reduce insurance premiums.
• Reporting to your agent or company that a car is principally garaged
in New Jersey when it is garaged elsewhere.
• Adding damages to a claim to cover the cost of your deductible or
prior premiums paid.
• Omitting high-risk drivers from your application or policy.
Hard fraud occurs when an accident, injury, theft or other loss is deliberately
staged, either by a lone person or as part of an organized fraud ring. These
rings often join dishonest doctors, lawyers and repair shop owners in snaring
innocent drivers with a staged collision that appears accidental. Some
examples:
• A driver stops abruptly in front of your vehicle, causing you to rear-
end it. In addition to collecting money for vehicle damages, the “crash
dummy” also submits a claim for nonexistent injuries to collect more.
• A vehicle is found abandoned and burned before it is reported stolen
by its owner.
• A fraudster obtains insurance on a vehicle using a counterfeit title and
registration. Later, a theft claim is led on the “paper car.”
Any form of auto insurance fraud is a serious crime in New Jersey that can
lead to heavy nes and possible jail time. Protecting yourself from fraud
scams is one way to help ght this crime. If you have specic information
about individuals or entities that may be committing insurance fraud, contact
the New Jersey Ofce of Insurance Fraud Prosecutor at 1-877-55-FRAUD.
What is Auto Insurance Fraud?
Auto insurance fraud occurs when people knowingly misrepresent pertinent
facts to a company or agent to obtain a policy or collect money to which
they aren’t entitled.
What are Your Rights?
31
Your Obligations as a New Jersey Driver
New Jersey state law requires that any registered vehicle be covered by
an insurance policy. Failure to maintain coverage can lead to higher prices
for new policies, placement in the “assigned risk” pool, suspension or
revocation of your driver’s license or registration, and additional nes and
penalties.
• Always make payments for your policy on time or a
lapse in coverage may result. A driver who incurs
a lapse in coverage will end up paying far more for
coverage.
• Always provide any information your company
seeks. Insurance companies have the right to
seek information about all licensed drivers in the
household.
• If you receive a non-renewal notice, do not wait to
shop for alternate coverage. Policies can be prepared
in advance to become effective on a date several days
or weeks after the application.
A driver who mails a renewal payment before the due date cannot lose
coverage. However, insurers can charge the driver a late fee if the payment
is postmarked on time, but arrives after the payment due date.
Maintaining
your auto
insurance
coverage
requires
that you:
A driver who mails a renewal payment
before the due date cannot lose coverage
if the payment is received within three
business days of the due date or there is
evidence it is postmarked prior to the due
date. However, insurers can charge the
driver a late fee if the payment arrives
after the due date.
What if My Renewal
Payment is Late?
Frequently Asked Questions
34
Due to nancial difculties, I sent my insurance payment a few days
late and the policy was canceled. My company did not notify me that
the policy was canceled; they just sent my check back. Isn’t there a grace
period during which the company must accept the payment?
There is no “grace period” for policies that have lapsed or terminated.
Under current regulations, companies must provide notice of payment
due dates according to what type of payment is due. Renewal offers
must be mailed 30 days prior to the due date. A cancellation notice for
nonpayment of premium must be mailed at least 15 days prior to the
expiration of the policy. If you do not pay your renewal premium or the
premium due amount on a notice of cancellation by the date specied, the
company is not required to once again tell you the coverage has lapsed,
nor to offer to reinstate your policy. While insurance laws require that
an insurer must be able to provide proof that a notication was mailed to
the address where you have told them you reside, they are not required to
mail any notice “certied” or “return receipt” and are under no obligation
to ensure that these notices are received.
Why do insurers charge young males more than young females?
Insurance rates are based on statistics and probability. Historically,
statistics have shown that, while males as a group have only a slightly
higher percentage of accidents and violations than females, accidents
involving youthful male drivers cause substantially higher amounts of
damage and cost the insurance companies considerably more in claim
settlement costs than accidents involving youthful females. Therefore,
insurance companies are permitted to set rates based on the overall risk of
the policy being written.
My son has received his driver’s license and our family now has two
cars and three drivers. My son is listed as an operator of my car on our
insurance policy, but my son is not allowed to drive my car; he uses
his mother’s car. How can I remove him from the rating of my vehicle?
The Named Driver Exclusion endorsement is available for the
Comprehensive and Collision portion of Standard policies. This
endorsement allows certain licensed drivers within the household to
be excluded from the rating of comprehensive and collision costs of a
particular vehicle on the policy. If you own vehicles that your child(ren)
does not operate, this may help save premium dollars. However, it should
be remembered that if the excluded driver does, for any reason, even in
an emergency, operate that vehicle there would be no coverage afforded
for repair to the vehicle in the event of an accident. (See page 6.)
Why Was My
Policy Canceled?
33
What if I don’t pay my premium?
If you don’t pay your insurance premium, the company will cancel your
policy. Getting a policy from another insurer may be difcult or may
cost more if you let your policy lapse and go without insurance. A lapse
exceeding 30 days could place you in the assigned risk market. (See
page 9).
I sent in my insurance payment on the due date, but the company said
it was too late and still canceled my policy. Can they do that?
Whether or not a policy is terminated for a late payment depends on
what type of payment is due. Most companies will allow policyholders
to make installment payments on their premiums and may even accept
these payments received after the initial due date. This is permissible
because a policy is already in force and there may be equity (premiums
already paid) available to continue coverage for a short time. However,
if no payment is received, the company will issue a notice of cancellation
for nonpayment of premium. If this payment is not received before the
due date, the policy will terminate. Until the initial payment for a policy
renewal is paid, there is no policy in force. Therefore, when the renewal
payment is not received by the due date, the previous policy expires and
the offered policy does not become effective. Should the policyholder
wish to continue coverage with that company, the company would then
need to write a new policy for that customer.
I got a notice that said I had to make my overdue premium payment
or my policy would be canceled on the 15
th
. I
took the money to my agent on the 15
th
,
but they said it was too late and the
policy had already been canceled.
How can this be?
Because an insurance policy must
provide coverage for every full 24-hour
day that it is in force, every insurance policy
expires at 12:01 a.m., meaning one minute
after midnight on the specied date. Therefore,
any premium payment must be received before the
cancellation date in order for the policy to remain in force.
Frequently Asked Questions
The Department wants all New Jersey drivers to make informed decisions
regarding their auto insurance coverage. We are happy to assist with any
additional questions you may have about insurance.
A
Additional PIP Coverage Options, 6
appeal, 30
assigned risk market, 9-10, 13, 21, 31,
33
Auto Insurance Purchasing Planner, 16
B
Basic Policy, 4, 7 (chart), 18
Bodily Injury Liability, 2, 5, 7 (chart)
C
cancellation, 29, 33, 34
claim, 2, 5, 25, 27, 29, 32
Collision coverage, 3, 4, 6, 7 (chart),
14, 26, 34
combined single limit, 2, 5
Comparative Negligence Act, 26
Comprehensive coverage, 3, 4, 6, 7
(chart), 14, 34
credit history, 11, 13, 17-20
D
deductibles, 5-6, 14, 23, 26, 32
discounts, 14-15
F
fraud, 22, 32
H
Health Care Primary option (PIP), 5,
14
I
inexperienced operator, 9, 21
insurance eligibility points, 9-10, 12,
21
insurance score, 11, 13, 17-20
Internal Appeal Process, 27
L
lapse in coverage, 13, 28, 31
liability, 2, 4, 6
limits, 5, 7 (chart), 14
Limited Right to Sue, 8-9, 14
M
mid-term cancellation, 29
N
Named Driver Exclusion, 6, 23, 34
no-fault coverage, 2
non-renewal, 30
P
Personal Automobile Insurance Plan
(PAIP), 10
Personal Injury Protection (PIP), 2, 4,
5-6, 7 (chart), 8, 14
premium, 1, 12, 15, 28, 32, 33
Property Damage Liability, 2, 5, 7
(chart)
R
rates, 11-15
S
Standard Policy, 4, 6, 7 (chart), 34
Special Automobile Insurance Policy
(SAIP), 4, 18
subrogation, 27
T
Tier rating, 11, 12
U
Underinsured Motorist coverage, 3, 4,
6, 7 (chart)
Uninsured Motorist coverage, 3, 4, 6,
7 (chart)
Unlimited Right to Sue, 8-9
V
voluntary market, 9-10, 12, 21
Index
For More Information
For more information or questions about
insurance, contact:
New Jersey Department of Banking
and Insurance - Consumer Inquiry
and Response Center (CIRC)
P.O. Box 471
Trenton, NJ 08625-0471
(609) 292-7272 or 1-800-446-7467
File a complaint online:
www.dobi.nj.gov/consumer.htm
The Ofce of Insurance Claims Ombudsman
is established in the Department to investigate
and help resolve complaints from consumers.
The Ofce of Insurance Claims Ombudsman
can be reached at:
New Jersey Department of Banking
and Insurance - Ofce of Insurance
Claims Ombudsman
P.O. Box 472
Trenton, NJ 08625-0472
E-mail: [email protected].gov
Visit us online:
www.dobi.nj.gov
