Key takeaways

  • The first phase of New Jersey’s latest car insurance requirements took effect in January 2023 and the second phase will occur in January 2026.
  • The cost for liability car insurance coverage for New Jersey drivers increased by an average of $145 per year due to the required higher coverage limits.
  • Approximately 1.1 million to 1.2 million vehicles were affected by this change, which accounts for 22 to 30 percent of New Jersey policyholders.

New Jersey has historically had one of the lowest minimum car insurance requirements in the country. In an effort to encourage drivers to have more financial protection, the New Jersey legislature enacted a two-step plan that phases in higher minimum liability limits over three years. The first phase started in January 2023 and there is some debate over whether forcing drivers to pay more for coverage they don’t want when car insurance premiums are at an all-time high is the right call. Bankrate explains what coverage changes New Jersey drivers can expect next and how to offset rising insurance rates.

New Jersey car insurance requirements

In August 2022, Governor Bill Murphy signed into law a bill that increases the minimum car insurance limits that drivers must carry in New Jersey. The first phase of these changes went into effect 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 Prior 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 was previously among the lowest in the country, although the state did require more coverage types than many other states. Mark Friedlander, Director of Corporate Communications at the Insurance Information Institute (Triple-I), noted 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 also noted that prior limits may be insufficient to cover accidents based on average claim cost data, and that the increase in limits was “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 better align New Jersey’s minimum coverage limits with other states, expert opinions are not as favorable toward the 2026 changes.

Friedlander said 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 said, “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:
Friedlander said 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 impacted 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 had coverage below the new 2023 requirement and will see their limits and premiums 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, Christine O’Brian, President of the Insurance Council of NJ said “over 1 million drivers are now paying on average $145 more per year for their liability coverage due to the change in the law. This pool of drivers is comprised of those who purchased the prior minimum limits of 15/30/5 and now are required to buy 25/50/25 limits, and typically represent low-income drivers. Unfortunately, these same drivers plus those who always purchased 25/50, totaling over 1.4 million drivers, will see another premium increase in January 2026 when the minimum liability limit rises again to 35/70/25. At this time, it’s unclear what impact this will have on premium, since 35/70 has never been sold in NJ before.”

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 (in most states), the type of car you drive and the optional coverage selections you choose. If you are affected by the minimum coverage changes in New Jersey, your premium impact could be higher or lower than the estimates.

Regarding the timing of the changes, the new minimum limits started with policies renewing on January 1, 2023, and the second coverage increase will start for policies renewing on January 1, 2026.This means that, if have a policy with minimum coverage, your coverage limits will stay the same until after it renews again in 2026. At that time it will renew with higher limits that meet the new law.

In general, the law disproportionately impacts low-income drivers since they typically purchase the minimum liability limits. We know that the average settlement for crashes that involve injuries is $18,000, which is $3,000 more than the old limit, but substantially lower than the new 25/30 limit. NJ essentially is mandating budget-conscious drivers to purchase more coverage than they may need or can afford. — Christine O'Brien, President of the Insurance Council of New Jersey

Drivers may still need more coverage

Even with the higher required limits, drivers may find that minimum limits still do not provide sufficient financial protection. Inflation rose rapidly in 2022 and still has not normalized, which means claims are costing more. The proposed property damage limit is $25,000 while the price data suggest the average cost of a new car in 2024 is around $48,451. 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 NJ car insurance increases

If you find yourself being affected by a NJ auto insurance increase, whether due to the law changes or inflation, there are steps you can take to potentially find the cheapest car insurance for you:

  • 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 minimum car insurance coverage limits prior to 2023 were among the lowest in the country and may not have been 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?