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More than one million drivers in New Jersey to be affected by new car insurance laws

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New Jersey has historically had one of the lowest minimum car insurance requirements — and yet one of the highest minimum coverage premiums — in the country. At $855 per year for minimum coverage, New Jersey is the fourth-most-expensive state in the country, and drivers pay an average of 57 percent more annually than the national average minimum coverage premium.

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In August, the New Jersey Legislature approved a bill to increase the minimum coverage limits in two phases, meaning New Jersey drivers will have more financial protection behind the wheel, but at an added cost to already-high premiums. Bankrate explains what is happening to New Jersey’s car insurance requirements and how these changes will affect New Jersey drivers.

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Key takeaways
  • New Jersey’s minimum car insurance limits will increase in two phases, starting in January 2023 and then again in January 2026.
  • Estimates of the expected premium increase for affected drivers range from $99 to $200 per year per vehicle.
  • Approximately 1.1 million to 1.2 million vehicles will be affected by this change, which accounts for 22 to 30 percent of New Jersey policyholders.

New Jersey’s current minimum coverage limits

A plan to increase NJ liability insurance was approved in August 2022 and will take place in two phases. The first phase will increase coverage limits on January 1, 2023, and the second phase will take effect on January 1, 2026.

It is important to note that New Jersey has two minimum car insurance coverage options, a basic and a standard policy. A representative from the New Jersey Department of Banking and Insurance (DOBI) told Bankrate that “[t]he changes in the law apply to standard policies; the law does not apply to basic policies. There are 53,000 basic auto insurance policies in New Jersey.” Drivers who choose the basic car insurance option will not see any changes to their coverage. The changes will only apply to drivers carrying the standard minimum car insurance coverage.

Coverage type Current standard minimum limits 2023 standard minimum limits 2026 standard minimum limits
Bodily injury liability (per person) $15,000 $25,000 $35,000
Bodily injury liability (per accident) $30,000 $50,000 $70,000
Property damage liability (per accident) $5,000 $25,000 $25,000
Personal injury projection $15,000 $15,000 $15,000
Uninsured motorist bodily injury (per person) $15,000 $25,000 $35,000
Uninsured motorist bodily injury (per accident) $30,000 $50,000 $70,000
Underinsured motorist bodily injury (per person) $15,000 $25,000 $35,000
Underinsured motorist bodily injury (per accident) $30,000 $50,000 $70,000

Why the minimum coverage limits are changing

With car insurance rates already increasing, why is New Jersey changing its minimum car insurance limits and further driving up costs? New Jersey’s minimum liability insurance is currently among the lowest in the country, although the state does require more coverage types than many other states. Mark Friedlander, Director of Corporate Communications at the Insurance Information Institute (Triple-I), notes that

New Jersey liability limits have not been raised since 1972…an increase to the state’s liability minimum requirements is well past due.

He notes that current limits may be insufficient to cover accidents based on average claim cost data, making this change “broadly supported by the insurance industry.” As vehicle and medical costs increase, minimum car insurance limits offer less coverage than ever before, causing more financial risk to policyholders.

However, not all industry experts support the approved changes. While the 2023 changes will better align New Jersey’s minimum coverage limits with other states, expert opinions are not as favorable toward the 2026 changes.

Friedlander says that Triple-I supports the initial minimum limit increase in 2023 but opposes the second phase. “According to estimates from New Jersey auto insurers,” he says, “approximately 75 percent of all bodily injury liability claims and more than 90 percent of all property damage liability claims could be settled at or below the new Jan. 1, 2023 limits.”  The Triple-I feels that:

The 2026 increase is not justified by average industry loss data and is out of step with the rest of the country.

Friedlander says the second coverage increase “will only result in increased premiums for drivers, likely leading some to forego insurance coverage.”

Effects on New Jersey drivers

Industry experts estimate that the minimum limit changes will affect between 22 and 30 percent of New Jersey drivers. According to a representative from the NJ DOBI, “1.1 million to 1.2 million vehicles have the current minimum coverage” and will see their limits increase with the new law. The second phase will likely affect more drivers since it increases limits even further.

When questioned about the impact on premiums, the experts estimated increases from $99 to $200 per year per vehicle for the first phase of changes. However, the cost of car insurance is highly personalized and depends on a number of underlying factors, including your driving history, the age of the drivers on your policy, the type of car you drive and the optional coverage selections you choose. If you are affected by the minimum coverage changes, your premium impact could be higher or lower than the estimates.

Regarding the timing of the changes, the new minimum limits will be effective on January 1 of either 2023 or 2026 (depending on the phase) for new policies and at the next renewal for existing policies. This means that, if you’re buying a new policy on or after the January 1 date and you want minimum coverage, you’ll have to purchase the higher limit. Existing minimum coverage policies will transition to the new limit at their renewal date. If you have a current minimum coverage policy that renews in June of each year, you will still have the lower limits until your next June renewal date, when the limits will increase to meet the limits set forth by the new law.

Drivers may still need more coverage

Even after the new law takes effect in 2023, drivers may find that minimum limits still do not provide sufficient financial protection. Inflation is rising rapidly, which means claims are costing more. Unfortunately, this could mean that inflation is leaving drivers underinsured. If you’re unsure if your coverage is enough to protect your finances, talk to an insurance agent about your current situation.

How to offset increased costs

If you find yourself being affected by a premium increase, whether due to the law changes or inflation, there are steps you can take to potentially save money on car insurance:

  • Compare quotes: Shopping around and comparing quotes from several companies is one of the best ways to find a competitive price. Every company has a different rating method, which means premiums will vary even for the same coverage.
  • Utilize discounts: Most car insurance companies offer at least a few discounts that could help you lower your bill. Common savings opportunities include bundling your auto and home insurance, opting for paperless statements or taking part in a telematics program.
  • Drive safely: Accidents and tickets increase car insurance rates substantially, so maintaining a clean driving record can help keep your premium down over time. You may even earn an additional safe-driver discount.

Insurance industry experts weigh in

“The resulting back-to-back premium increases could lead to a much higher uninsured motorist rate in the Garden State, which will have a negative impact on every driver. We disagree that a second phase increase (Jan. 1, 2026) was necessary.”

— Mark FriedlanderDirector of Corporate Communications at the Insurance Information Institute

“With inflation reaching a 40-year high and the cost of everything skyrocketing, the American Property Casualty Insurance Association (APCIA) has been concerned with the potential cost increases associated with this new law, particularly for those who are on a fixed income and may now be forced to choose between paying for basic necessities such as gas, rent, groceries, etc. or insurance. Some consumers may have no choice but to opt to forego insurance altogether, a result which would be in no one’s best interest and could raise the uninsured rate in New Jersey — currently the lowest in the nation at 3.1 percent.”

— Alison CooperVice President of State Government Relations for the American Property Casualty Insurance Association

The bottom line

New Jersey’s current minimum car insurance coverage limits are among the lowest in the country and may not be sufficient to cover average claims costs. Increasing the minimum limits could help solve this issue, but will also likely increase premiums for a state with an already higher-than-average cost of insurance. This may cause some drivers to opt out of coverage altogether. Additionally, even the new minimum limits may not provide enough financial protection for all drivers. Will New Jersey’s new minimum coverage limit solve one problem only to create another?