New Jersey No-Fault Car Insurance

New Jersey's car insurance system is often referred to as "choice" no-fault, since drivers can choose between the "limited" and "unlimited" right to sue after a car accident.

When it comes to car insurance coverage, vehicle owners in New Jersey are required by law to carry at least a "Basic Policy." New Jersey is also a "no-fault" car insurance state, which means your options for pursuing a claim can be limited when you're injured in a car accident (although there's more of a "choice" involved than you'll find in most no-fault states). In this article, we'll explain what a "Basic Policy" entails in New Jersey, and we'll discuss how no-fault car insurance works, including the "limited right to sue".

No-Fault Car Insurance in New Jersey

New Jersey is one of a dozen or so states that follow some form of a no-fault car insurance system. Under no-fault, your own car insurance coverage (in New Jersey, it's your "personal injury protection" or "PIP" coverage) pays for medical treatment and other out-of-pocket losses incurred by anyone covered under the policy, up to coverage limits, no matter who caused the accident. But with a no-fault/PIP claim, you can't get non-monetary damages stemming from the accident, including compensation for your "pain and suffering."

The "Limited Right to Sue" After a Car Accident in New Jersey

For New Jersey vehicle owners who choose only a "Basic" car insurance policy (and we'll spell out what that means a little later), the good news is that medical expenses and other economic losses incurred by anyone covered under the policy will be paid after a car accident, up to the limits of PIP coverage, regardless of who was at fault for the crash.

But with the Basic Policy, the policyholder (and the policyholder's family members and any other covered individual) is automatically bound by what's called a "limited right to sue." The injured person can only pursue legal action against the at-fault driver -- stepping outside the no-fault provisions of PIP coverage -- if the accident caused the injured person to suffer:

  • loss of a body part
  • significant disfigurement
  • significant scarring
  • a displaced fracture
  • loss of a fetus
  • permanent injury (meaning the affected body part has not healed to allow normal function, and is not expected to), or
  • death.

If the impact of the accident has meant this threshold, the injured person gains the right to file a third-party car insurance claim or personal injury lawsuit against the at-fault driver, which allows recovery of "pain and suffering" damages and other non-economic losses (which, again, are not available via a no-fault or PIP claim).

You can get more details on New Jersey's Basic Auto Insurance Policy from the state's Department of Banking & Finance.

It's important to note that a New Jersey no-fault/PIP claim applies to injuries caused by car accidents, not vehicle damage claims. A claim for damage to (or total loss of) a vehicle can be made against the at-fault driver in New Jersey, with no limitations.

Now that you understand how no-fault car insurance works in New Jersey, let's look at a "Basic Policy" and other options for car insurance coverage.

"Basic" Car Insurance Coverage in New Jersey

New Jersey drivers are required to carry at least a "Basic Policy," which includes:

  • $5,000 in Property Damage Liability coverage (which applies if you cause damage to someone else's vehicle or other property; note that this coverage does not apply to damage to your own vehicle), and
  • $15,000 in Personal Injury Protection coverage, per person, per accident (covers injuries suffered by you or anyone else entitled to PIP under your policy; actually allows up to $250,000 for certain serious injuries, such as permanent/significant brain or spinal cord injuries, or disfigurement).

Keep in mind that the Basic Policy does not require or include bodily injury liability coverage (you can add $10,000 in bodily injury liability coverage to your Basic Policy). Without liability coverage, if you cause a car accident in which other drivers or passengers are injured, you'll be financially responsible for losses not covered by the injured parties' PIP insurance. In other words, a Basic Policy may not be for everyone, especially those with significant personal assets.

The "Limited/Unlimited Right to Sue" Choice

Besides the "Basic" policy, New Jersey vehicle owners have the option of choosing a "Standard Policy," which includes bodily injury liability -- with limits ranging from as low as $15,000 per person/$30,000 per accident, to as high as $250,000 per person/$500,000 per accident.

If you purchase a "Standard Policy," you must choose between the "limited right to sue" and the "unlimited right to sue" options.

The "limited right to sue" option (discussed above) is cheaper, but it also means giving up the right to hold the at-fault driver responsible for your "pain and suffering," unless the accident is one that qualifies for stepping outside the restraints of a no-fault/PIP claim (those are set out in the bullet list two sections above).

The "unlimited right to sue" puts all options on the table after a car accident, no matter the extent of the resulting injuries, including the option to file a lawsuit against the at-fault driver, and the recovery of the full spectrum of compensation (all economic and non-economic losses stemming from the accident). Learn more about car accident lawsuits.

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