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.

By , J.D. · University of San Francisco School of Law

Especially after a car accident, New Jersey drivers need to have a basic understanding of how car insurance coverage works in the state:

  • Vehicle owners are required by law to carry at least a "Basic Policy" in New Jersey, which is a combination of "no-fault" (also known as "personal injury protection") coverage for themselves, and liability insurance that will cover damage to another driver's vehicle.
  • A "Standard Policy" provides additional coverage options for New Jersey drivers.
  • New Jersey offers more of a choice than you'll find in most no-fault states when it comes to options for getting compensation after an accident, including an "Unlimited Right to Sue" option.

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 car 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."

Who Is Covered Under New Jersey No-Fault Car Insurance?

Besides the policyholder, no-fault/PIP car insurance in New Jersey typically applies to:

  • the policyholder's family/household members (if they don't have their own car insurance policy)
  • anyone driving the policyholder's vehicle with the policyholder's permission (if the guest driver doesn't have their own coverage), and
  • passengers riding in the policyholder's vehicle (if they don't have their own coverage).

What's Covered Under No-Fault Car Insurance In New Jersey?

Depending on whether the "Basic" or "Standard" option is chosen at the time of of a car insurance policy purchase, New Jersey no-fault/PIP insurance covers:

  • the cost of medical treatment and any medical equipment necessary to treat your car accident injuries (automatic with a "Basic" or "Standard" policy)
  • reimbursement of wages/income you've lost as a result of your car accident injuries ("Standard" policy only)
  • payment of the cost of "replacement services," when you can't perform certain tasks (i.e. household work, caring for family members) because of your injuries ("Standard" policy only), and
  • "Death benefit" and "funeral benefit" coverages if someone dies as a result of a car accident ("Standard" policy only).

Policy purchasers can choose higher deductibles to lower their PIP premiums in New Jersey, and can also lower the cost of auto insurance by selecting their health insurer as a primary source of coverage for medical treatment after a car accident.

Note: New Jersey also offers a "Special Automobile Insurance Policy" for drivers who are eligible for Federal Medicaid. Learn more about the SAIP option from the New Jersey Department of Banking & Insurance.

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 claimant 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).

Does New Jersey No-Fault Insurance Cover Damage to My Car?

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. That means you can file a PIP claim with your own insurance company (for your injuries) and a separate third-party car insurance claim against the other driver's car insurer (or even a lawsuit) for your vehicle damage, if the other driver caused the accident.

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.

When Do I Need to Show Proof of Car Insurance In New Jersey?

You'll need to produce your insurance company-issued New Jersey Insurance Identification Card for your vehicle if:

  • you're involved in an accident in the vehicle
  • you're stopped for a traffic violation in the vehicle, or
  • you're stopped in a "spot check" by a police officer.

Can I Show Digital Proof of Car Insurance In New Jersey?

Yes, the insurance identification card can be produced in either paper or "electronic form," meaning on a smartphone, tablet, or similar device, according to the New Jersey Motor Vehicle Commission.

What Are the Penalties for Driving Without Car Insurance In New Jersey?

If you're caught driving without car insurance in New Jersey, you could face a number of different punishments and sanctions, including:

  • fines
  • community service
  • driver's license suspension, and
  • car insurance-related surcharges.

New Jersey's "No Pay, No Play" Law

Another penalty related to driving without insurance can come under New Jersey's "no pay, no play" law (which can be found at N.J. Rev. Stat. section 39:6A-4.5). This law says that if you file a lawsuit for car accident injuries, you'll be barred from recovering "non-economic" damages in court even if you win your case, if you were driving without insurance at the time of the crash.

Non-economic damages include compensation for your physical and mental "pain and suffering," and losses like these are often the biggest determinants of case value, so this law can have a major impact on your injury claim.

Getting More Information and Help

You'll find more details on auto insurance in the state on the New Jersey Department of Banking & Insurance website and its New Jersey Auto Insurance Buyer's Guide.

You can also learn more about:

If you've been in a car accident (especially if your injuries are serious), you might want to understand more about your options. Learn how an attorney can help with your car accident case.

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