New Jersey drivers will never be satisfied with the cost of their car insurance. Its congested roads, the highest population density of any state, and a high crime rate ensure that average auto insurance premiums will be above average.
Residents who choose minimum coverage pay the fifth-highest average rate in the nation — $855 a year — for the basic policy to meet state requirements, according to bankrate.com. New York’s minimum coverage is highest at $1,339.
Rates are higher in New York even though much of that state is not urbanized. One reason is that the minimum coverage required by New York and almost every other state is higher than here. New Jersey is one of four states that only requires $15,000 in bodily injury coverage (and Florida only requires $10,000). The vast majority of states require $25,000 and three require $50,000.
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The appeal of less and less expensive insurance coverage is obvious and has certain advantages. New Jersey has the fewest uninsured drivers in the country.
Too little coverage, however, is only better at no coverage. Average injury claims are $18,000, leaving most accident victims short of compensation. Many claims far exceed this average, and for victims, being hit by an undercovered driver is only marginally better than an uninsured driver.
This year, legislative leaders decided to finally tackle New Jersey’s inadequate minimum auto insurance. The coverage requirement had not been increased for 50 years – ridiculous given inflation and especially soaring medical costs.
The proposed fix was equally ridiculous a minimum bodily injury coverage of $250,000 for basic and standard auto policies. This would have made New Jersey’s minimum five times higher than any other state and 16 times higher than the existing requirement.
Needless to say, this would have resulted in major increases in insurance costs for nearly half of the state’s drivers, with more than a million of them paying up to $350 a year more. Hard on the family budget when gas is already well over $4 a gallon.
After a storm of supporters opposing the bill, the minimum coverage requirement was revised down sharply and the bill quickly passed without discussion late last month.
Another bill was dropped. This would have prohibited drivers from using their private health insurance as the primary payer for their injuries, thus getting a small discount on their car insurance policies. It was standard consumer advice until health insurers began refusing to cover road accidents, often without the knowledge of policyholders. This choice is still possible for now, but people need to make sure their health insurance covers their car accidents or they’ll be left with a surprise coverage gap.
The Legislative Assembly has sent Governor Phil Murphy a bill increasing the minimum amount of liability insurance from the current coverage of $15,000 to $25,000 starting next year. The automatic increases would raise the minimum to $35,000 from 2026. Insurance industry officials say 1.1 million drivers would pay about $125 more each year.
The increase next year is likely too small, but appropriate given the current economic strains on low-income families and individuals. The further increase by 2026 seems reasonable, given New Jersey’s risky roads, but could be stalled if the feared recession occurs before then.
There’s never a good time to raise auto insurance rates, but the Legislative Assembly didn’t have to wait 50 years for the worst time to do so. That left only politically painful choices.