Purchasing automobile insurance is a confusing and often misunderstood process. If you don't purchase proper insurance, it may have catastrophic consequences should you be involved in an accident. When choosing insurance coverage, it's easy to be fooled into thinking you're saving money when you see lower premiums, but it's likely your lower premiums may be in return for giving up vital insurance coverage that may end up costing you far more in the event of an accident. To help you better understand the process of purchasing automobile insurance, below is a brief explanation of different automobile insurance policies.
First, let's take a look at some key insurance provisions that consumers should know about:
Personal Injury Protection (PIP) - Medical expense benefit for the payment of reasonable and necessary treatment of bodily injury that occurred as the result of an automobile accident. It is important to elect a sufficient PIP coverage amount because if you need medical treatment after an accident, this PIP will pay for it.
Property Damage Liability – The amount the insurance policy will cover in the event you damage another's property, typically someone else's car but it could be any piece of personal property.
Personal Injury Liability/Bodily Injury Coverage – The amount the insurance policy will pay for someone else's injuries in an accident. It is important this amount is sufficient to cover any damages you cause so the other injured person doesn't pursue your personal assets in a lawsuit.
Verbal Threshold a.k.a. Limitation on Lawsuit – An election that will limit your ability to bring lawsuits for pain and suffering in return for lower premiums. If elected, the insured may only sue if they have certain serious permanent injuries. Basic and Special policies that are mentioned below automatically apply the verbal threshold/limitation of lawsuit election.
Zero Threshold a.k.a. No Limitation on Lawsuit – An election that allows you to bring a lawsuit for pain and suffering regardless of whether your injuries are permanent.
Uninsured (UM) / Under Insured (UIM) Coverage – The amount the insurance policy will pay in the event you are injured or your personal property is damaged in an accident and the other driver does not have insurance or adequate insurance to cover your losses. Uninsured coverage is important because it will also apply in hit and run scenarios. This is often the most overlooked aspect of automobile insurance, but vitally important because you can't control who you get in an accident with and their levels of insurance, but you can control this coverage.
In an effort to make insurance affordable for all, New Jersey passed the Automobile Insurance Cost Reduction Act (AICRA) which provides for multiple classes of insurance, including:
BASIC AUTOMOBILE INSURANCE
Basic automobile insurance is a class of insurance that is available to any consumer, regardless of income, that provides reduced coverage in return for lower premiums. One example is sharply reduced Personal Injury Protection (PIP) coverage in the amount not to exceed $15,000. It also provides limited mandatory property damage liability of $5,000 and no mandatory bodily injury or death liability coverage. All basic policies are subject to the verbal threshold/limitation on lawsuit and do not have uninsured or underinsured coverage. Basic Automobile insurance is bare minimum insurance that allows drivers to comply with mandated insurance coverage.
SPECIAL AUTOMOBILE INSURANCE
Special automobile insurance is an initiative to help make available limited automobile insurance coverage to low income drivers who are eligible for federal Medicaid with hospitalization. These policies are popularly known as “dollar-a-day” policies because they are available for $365 per year. This type of insurance provides only limited emergency medical treatment after an accident, and a $10,000 death benefit. It does not provide bodily injury or property damage liability coverage or uninsured/underinsured coverage.
STANDARD AUTOMOBILE INSURANCE
Standard insurance offers the most flexibility to choose the right coverage for the individual while also allowing consumers to limit what they will pay in monthly premiums. When choosing insurance, it is important to recognize that you cannot choose who you are involved in an accident with. The other driver may have a basic or special insurance policy or may even be uninsured altogether. That is why it is important, if possible, to elect sufficient uninsured and underinsured coverage. If you do this, you will be protected regardless of the other driver's insurance policy. Another provision to consider is the verbal threshold or zero threshold election. While the verbal threshold election will save you money on your premium, it will limit your ability to bring a lawsuit when your injury may not be permanent, but still causes you pain and suffering.
No one likes to think about purchasing insurance or the possibility of being involved in a car accident. Unfortunately, every day drivers are involved in accidents that cause serious injuries. It is important you take the necessary steps to protect yourself in the event of such an accident. Talk to your insurance carrier about increasing your coverage. In many cases, for just a couple more dollars a day you could be adequately protected in the event you are injured in an automobile accident. If you have been involved in an accident, please reach out to our office to set up an appointment to talk to an experienced attorney about how we can protect you.