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Understanding No-Fault Insurance in New Jersey

When a car accident turns your life upside down, we can help you get your life back.

Have questions about no-fault car insurance in NJ? We’ve got the answers.

  • No-Fault Doesn’t Mean No One Is at Fault: New Jersey requires no-fault policies so that there’s never any question about who covers your medical bills.
  • You Can Still File a Personal Injury Claim: If you were seriously injured in a car accident and the other driver was at fault, a no-fault policy doesn’t mean you can’t file a claim. Take the first steps to filing your claim by contacting us for a free case review. The experienced attorneys at Console and Associates have been helping New Jersey auto accident victims fight for maximum compensation for more than 25 years. Check out our auto accident claim case results.

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Table Of Contents

  1. What Is No-Fault Insurance?
  2. What Is Personal Injury Protection (PIP)?
  3. Common Questions About New Jersey No-Fault Law
  4. Why You Should Contact a Personal Injury Attorney

What Is No-Fault Insurance?

A no-fault policy means that your insurance plan always covers your medical bills. It does not matter who is at fault for causing the crash. If you need medical treatment, your policy pays for it.

To drive in the state of New Jersey, you need car insurance. There are dozens of policies and insurance companies to choose from, but they all have to meet minimum state standards.

The state requirements change over time, but since 1972, all auto insurance plans sold in New Jersey must be no-fault policies.

The section of your policy that covers your medical costs is ‘personal injury protection,’ or PIP, insurance. Like other options on your plan, you can choose how much PIP coverage you want to purchase. Most drivers choose $250,000 as their PIP coverage limit, according to the official New Jersey Auto Insurance Buyer’s Guide.

Choosing a lower personal injury protection limit keeps your premium low, but you’ll have less money to cover bills when you get in an accident. This could leave you on the hook for paying thousands of dollars in medical bills, even if someone else caused the accident.

What Are the Benefits of No-Fault Insurance?

The largest benefit of no-fault insurance is that it allows you to get the medical help you need when you need it.

In the days after an accident, getting timely care is crucial for recovery. Without a no-fault policy, you might have to pay for treatment out of your own pocket until the insurance companies involved determine who’s at fault for an accident. Given the high cost of acute medical treatment, this situation could pose a real problem for car accident victims and their families. No-fault insurance policies eliminate this need for accident victims to either wait to seek medical care until after the insurance company makes a decision on liability or pay out of pocket for initial treatment.

Importantly, NJ’s no-fault car accident insurance system does not prevent you from seeking compensation if the other driver caused the accident. You can still file a claim for damages. All this no-fault insurance system does is help streamline the process of getting you the medical care you need.

What Is PIP Insurance?

woman holding neck in pain | personal injury attorney new jerseyPersonal Injury Protection helps pay for the medical and other personal costs from your car crash. You won’t use your PIP plan to pay to repair your car or cover the medical costs of your passengers or the other driver. The policy only covers your personal costs.

What Expenses Will PIP Cover

The primary purpose of PIP insurance is to cover your medical bills, including:

  • Doctor visits
  • Diagnostic tests
  • Medication
  • Rehabilitation therapies, like physical therapy and occupational therapy

However, PIP benefits also cover other personal costs, including:

  • Lost Wages: A serious injury might prevent you from returning to work. PIP coverage helps make up for not having that salary. Often, the amount of lost wages coverage provided by PIP insurance is as little as $100 per week, which means that the amount of lost wages compensation available through your PIP coverage is typically not enough to fully make up for the income you will lose. That’s why, even in states with no-fault auto insurance, many accident victims must pursue a personal injury claim to recover the full amount of income they lose due to an injury.
  • Essential Service Benefit: This benefit helps make up for the cost of hiring someone to perform a task you would perform yourself if you weren’t injured, such as hiring someone to mow the lawn or wash your laundry. PIP caps this coverage at $12 a day.
  • Death and Funeral Benefits: If you die in a car accident, your PIP coverage will pay your next of kin your maximum amount of lost wages and essential service benefits, as well as up to $1,000 towards funeral costs. Unlike your lost wages, the only thing required for the death benefit is proof of death.

The size of your PIP policy determines what money you have available when you get in an accident. In New Jersey, the minimum amount of PIP coverage a plan can have is $15,000, though most residents carry $250,000 or more.

Many frugal drivers try saving money by reducing their PIP coverage. While it’s true this can save you money on your premiums, it means you might not have the coverage you need if you do get into an accident.

Why You Should Always Set PIP As Primary

After choosing how much PIP coverage you would like, you’re asked if you would like PIP or your health insurance policy to be primary. It is likely that your insurance company will recommend or suggest you put your health insurance as primary. They’ll warn you that making PIP primary increases your premium.

Yes, having your PIP policy be primary will increase your premiums, but you should do it anyway. In the long run, this is almost always the wiser choice.

What Does Setting an Insurance Policy as Primary Mean?

Man with neck pain after a car accidentWhen you get in an auto accident, your medical bills first go to whatever policy you set as primary. After you use up that insurance, the other policy takes over.

This means that if you set your health insurance policy as primary, it gets billed first. Most health plans have high deductibles you have to pay before your policy kicks in. In a serious accident, you could end up owing the hospital thousands of dollars.

If you don’t have PIP set as primary, you won’t ever have access to the PIP funds that you’re paying to have. Modern health insurance plans have no spending caps, meaning that you will never exhaust your coverage and become eligible to use your PIP benefits. You may, however, have to meet a new deductible when your health insurance plan resets each year.

Not choosing PIP as primary will essentially translate into less of a financial recovery in a personal injury claim. That’s because the health insurance company has a right to seek reimbursement out of your personal injury settlement for the costs they covered related to your car accident.

If the health insurance company convinces you to set PIP as your primary coverage for medical care in exchange for a lower premium, they never have to pay for your medical costs, even though you’re paying for a policy. The car insurance company gets your money and never has to give it back. It might be good business, but it is terrible policy.

Common Questions About No-Fault Plans

What Are the Negatives of No-Fault Insurance?

One of the reasons New Jersey enacted its no-fault insurance policies was to help manage insurance costs by limiting what you could sue an insurance company for. That’s why it’s difficult to file a personal injury claim unless you have evidence of a serious injury.

However, lawmakers wanted to make sure that you’d have the ability to get treatment for your injuries even if they weren’t considered serious enough to sue. They solved this problem by requiring personal injury protection coverage as part of NJ auto insurance policies.

If I’m Not at Fault, Why Do I Have to Pay?

You didn’t cause the crash, so it does seem weird, at first, that you have to use your insurance plan to pay. But this is a good thing. When you’re in an accident, you know you have insurance to cover the cost because you’re the one who purchased it.

After the police determine who’s at fault for your injury, you have the ability to file a claim and get compensation.

Does PIP Cover All of My Medical Bills?

No, PIP does not cover all of your medical bills that result from an accident. You would be responsible for paying:

  • The deductible
  • Copayments
  • Any medical expenses beyond the limits of your PIP coverage amount

One of the options you select when you purchase a car insurance policy is how large you want your deductible to be. Your deductible is the amount of money you have to pay out of pocket when you’re in an accident before your insurance policy pays anything.

After your deductible, most PIP policies say you’re responsible for 20% for the first $5,000 of medical bills that result from your accident, minus your deductible.

Once you hit this out-of-pocket amount, you are no longer responsible for additional medical bills related to the accident up to the level of personal injury protection you selected on your policy. The auto insurance company pays the remaining medical bills.

If you chose to purchase low levels of PIP to save money on insurance, you will have to pay any bills that remain once the costs exceed your PIP coverage limits. In this case, a health insurance policy may be responsible for some of the medical costs, but you would have to meet your health insurer’s deductible, pay your copayment and coinsurance obligations, and get care from providers who are in your coverage network.

Will No-Fault Insurance Hurt My Premiums?

No, your rates won’t go up after an accident if you’re not at fault. Remember, the “no-fault” part of your policy is about who pays your medical bills, not who is responsible for the accident.

Can My Insurance Company Deny PIP Coverage?

Like any health insurance policy, each plan has a list of procedures they will and will not cover. If you want to seek treatment the insurance company doesn’t see as necessary, the insurer will not cover it.

If you are drunk or under the influence of illegal drugs during the accident, the insurance company may be able to deny your claim. Companies can also try to deny your claim if you own an uninsured vehicle.

Finally, insurance companies can deny your claim if you wait too long to seek treatment. This is why our car accident lawyers always recommend that you see a doctor even if you feel fine after your accident. If your injuries don’t show symptoms right away, you might not seek treatment until it’s too late.

What Happens If I Don’t Have Health Insurance?

PIP will still pay for your injuries even if you don’t have health insurance. However, we recommend that you always make sure you have health insurance because medical bills pile up quickly.

Once you use up your PIP policy, you’re responsible for your medical bills if you don’t have health insurance. Filing a personal injury claim can help recover those costs, but reaching a settlement takes time. Until then, you need to pay these expenses out of pocket. Recovering from a serious injury can cost hundreds of thousands, or even millions, of dollars.

What Is the Automobile Insurance Cost Reduction Act?

In 1998, New Jersey lawmakers passed the Automobile Insurance Cost Reduction Act (AICRA), hoping to reduce insurance premiums. In the process, however, they limited your options to get the care you needed in the event of an accident.

The AICRA created limits on the damages you could seek in a personal injury claim. The bill also allowed insurers to create “limited plans” that offered small premiums in exchange for underwhelming coverage.

What Is Full Tort Vs. Limited Tort?

Your car insurance plan gives you the option between choosing “limited” or “full” tort. This is also called your “limitation on lawsuit” selection.

  • Limited Tort means that you waive your right to sue for pain and suffering, in many cases, in exchange for lower premiums. You still have the ability to seek compensation for things like your lost wages and medical bills. However, you can’t sue for the emotional and mental costs of your injury except in the case of certain instances of serious or permanent bodily injury. The list of these exceptions is more arbitrary and less inclusive than you might think.
  • Full Tort means that you do not waive any rights to compensation. Choosing full tort protects your legal rights. Unfortunately, most insurance companies charge you more for this option.

New Jersey Auto Accident Injury Lawyers

If you or a loved one have serious injuries from an automobile accident, seek medical attention. Then give our New Jersey car crash attorneys a call.

With all of the loopholes and coverage options in a New Jersey auto insurance policy, filing a claim can be very confusing. You’re left wondering what to do next and how your injuries will impact you in the long run.

You just want to get your life back on track, but you’re not sure where to start. That’s why you want an advocate like Console and Associates fighting for you.

We have more than 25 years of experience helping thousands of clients. We understand New Jersey auto accident law, and we’re committed to helping you. When you work with us, we treat you like we’d want someone to treat our own family. Our no-win, no-fee promise means that you’ll pay nothing for our help unless and until we successfully settle your claim.

Recovery can be a long, difficult journey, but you will get better. You will get your life back on track. And we’re here to help. Your well-being is our top priority.

Call us now and let us help with a free consultation!

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Article Reviewed By Richard P Console Jr.

richard-console-featured-imageThis article was professionally reviewed by Richard P Console Jr, an attorney licensed to practice in New Jersey, New York, and Pennsylvania.

Mr. Console has more than twenty-five years of experience practicing personal injury law and successfully resolving vehicle accident claims on behalf of his clients.

Learn more About Richard P Console Jr.

While this information was reviewed for accuracy, it should not be considered legal advice. Every claim is different. If you are thinking of pursuing a personal injury claim and have a question, contact us directly.