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Posted On October 4, 2012 Personal Injury

Understanding New Jersey’s ‘No Fault’ Law

The 2 Most Important Things You Need to Know About New Jersey’s ‘No Fault’ Law:

After being involved in an accident that was not your fault, you are faced with many struggles. You are in pain and may be hospitalized—you then learn that the at-fault driver will not be held responsible for your medical bills, adding to the extreme stress you are under. The reason the responsible driver’s insurance will not cover your medical bills is due to the fact that New Jersey is what is known as a ‘No Fault’ state.

Don’t panic. Our experienced New Jersey auto accident attorneys will explain everything. Here are the two most important things you need to know:

  1. No-Fault Doesn’t Mean No One Is At Fault: New Jersey requires no-fault policies so that there’s never any question which insurance policy covers your medical bills.
  2. 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.

What Does ‘No Fault’ Mean

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.

What Is No-Fault Insurance?

What the ‘No Fault’ law states is that each driver involved in an automobile accident is responsible for his or her own medical bills either through their own auto insurance policy or health insurance. It does not matter if you were at fault for the accident or not. Under a no-fault policy, your insurance plan, rather than the other driver’s, always has to cover your medical bills.

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.

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

What Is PIP Insurance?

The section of your policy that covers these costs is known as ‘personal injury protection’ or PIP insurance. 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 – primarily, medical – costs.

Like other options on your plan, you can choose how much PIP coverage you want to purchase. The standard amount, which most drivers choose, is $250,000, but you can adjust it higher or lower. In New Jersey, the minimum amount of PIP coverage a plan can have is $15,000, though most residents carry $250,000 or more.

The size of your PIP policy determines what money you have available when you get in an accident. Many frugal drivers try saving money by reducing their PIP coverage. While it’s true that choosing a smaller policy keeps your premium low, this means you’ll have less money to cover bills when you get in an accident. You might not have the coverage you need to afford the full extent of medical care necessary to make the best possible physical recovery.

New Jersey Car Crash Attorneys

If you or a loved one have serious injuries from an automobile accident, seek medical attention. Then give us a call.

We have more than 25 years of experience helping our clients with their personal injury claims. Recovery can be a long, difficult journey, but you will get better. We’ll help.

What Does PIP As Primary Mean?

Once you select the amount of PIP coverage you want to purchase, you must decide if you would like PIP to be your primary coverage, or your health insurance policy. This is a big decision, one in which many drivers make a big mistake.

It is very likely that your insurance company will try to convince you not to put PIP as primary. Your insurer may warn you that your rates will be higher because of this choice.

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.

Always Set PIP As Primary

When you get in an accident, your bills first go to whatever policy you set as primary. After you use up that insurance, the other policy takes over.

In the case that you have listed PIP as primary on your insurance policy, your auto insurer will have to cover your medical expenses up to the PIP limit you have chosen before the costs are placed on your health insurance policy. Although you have a deductible and a copayment responsibility when you start using your benefits, you will have access to the full amount of PIP coverage you purchased, if your medical expenses require it.

If you do not choose to have PIP as primary, you will never have access to those funds. Ever. It doesn’t matter how much PIP coverage you chose when purchasing the policy – any extra price you paid for a higher level of PIP coverage will be of no consequence if PIP is not primary. Modern health insurance plans have no spending caps, so you never exhaust your coverage.

That’s why your car insurance company discourages you from setting PIP as your primary. If they convince you to take the lower premium, they never have to pay for your medical costs, even though you’re paying for a policy. They get your money and don’t have to give it back. It might be good business, but it is a terrible policy.

There are other drawbacks of having health insurance, rather than PIP, as your primary insurance coverage in a car accident. Most health plans have high deductibles you have to pay before your policy kicks in – much higher than the typical auto insurance policy. Between the deductibles and copayment and coinsurance responsibilities you face, you’re likely looking at many thousands of dollars out of pocket.

Although health insurance policies have an out of pocket maximum amount, those amounts are so high that you could still end up owing the hospital thousands of dollars even with “good” insurance. That amount resets when the policy year ends and a new one begins, so if your recovery takes months to years and stretches between policy years, you could end up paying even more out of pocket.

How Health Insurance as Primary Affects a Personal Injury Settlement

One of the biggest downsides of choosing health insurance as primary – and the reason attorneys recommend against doing so – is how it affects your payout from an accident lawsuit. If you choose to pursue a pursuing a personal injury claim following your car accident and have health insurance as your primary coverage, your insurance company may get reimbursed out of your settlement.

Essentially, New Jersey law permits your health insurer to demand that you reimburse the company for covering your medical expenses from the accident, on the grounds that these costs would have been covered by PIP had you not chosen health insurance as primary. Your health insurer can place liens on your settlement.

That money comes out of any settlement or jury award you would receive – directly impacting your financial compensation. Not choosing PIP as primary will then translate into less of a financial recovery in a personal injury claim.

What Other Expenses Will PIP Cover?

The primary purpose of PIP insurance is to cover your medical bills, including doctor visits, medication, and recovery. However, the policy covers 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. Depending on your coverage, this can be between $100 and $5,200 a week. If the accident is fatal, PIP insurance pays out a portion of your lost wages to your family. However, the amount of lost wages compensation available through your PIP coverage is often not enough to fully make up for the income you will lose. 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 do 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 Benefits: If you die in a car accident, your PIP plan will pay your next of kin. Unlike your lost wages, the only thing required for the death benefit is proof of death. Most plans offer a flat $1,000.
  • Funeral Benefits: PIP plans offer up to $1,000 towards funeral costs in the event of death.

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.

But 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 by requiring personal injury protection 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?

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 your 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. The insurance company pays the remaining bills, up to the level of Personal Injury Protection you selected on your policy.

So, if you chose to purchase low levels of PIP to save money on insurance, you or your insurance will have to pay any bills that remain once the costs exceed your PIP coverage limits.

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 can deny your claim. Companies can also 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 we always recommend 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 you always have health insurance because medical bills pile up quickly.

Once you use up your PIP policy, you’re responsible for your medical bills. 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 millions, of dollars.

What Is the Automobile Insurance Cost Reduction Act?

In 1998, New Jersey lawmakers passed the Automobile Insurance Cost Reduction Act, 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.

Limited Tort means that you waive your right to sue for pain and suffering 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. There are exceptions to this limit in the case of serious or permanent bodily injury.

Full Tort means that you do not waive any rights to compensation. Unfortunately, most insurance companies charge you more for this option.

If you have any questions about your individual insurance policy or if you have been injured in a car accident, call the New Jersey auto accident lawyers at Console & Associates P.C. today at (866) 778-5500. We can explain your coverage options and how they will affect your personal injury claim.

Understanding Auto Insurance in New Jersey

No Fee PromiseWith 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. You will get better. You will get your life back on track. Your well-being is our top priority

Our no-win, no-fee promise means that you’ll pay nothing for our help unless and until we successfully settle your claim.

Article Reviewed By Richard P Console Jr.

Richard P. Console Jr.This 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.