New Jersey has an average auto insurance premium of $1,217 annually, making it the third highest in the nation, according to a study from the National Association of Insurance Commissioners (NAIC) that researched rates across all states from 2005 to 2009. The good news is the 2009 figure is down by more than $100 from 2005, when New Jersey was the second highest nationally.
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While averages are nice to know, many factors come in to play when determining your individual auto insurance rate, including age, type of vehicle, driving record, credit rating, county in which you reside and numerous other factors related to you and general risk statistics. Consider the following types of coverage offered by New Jersey auto insurance providers, as well as tips to help you save money and mistakes to avoid.
Types of Coverage
Under the Automobile Insurance Cost Reduction Act, all drivers must have access to an affordable, basic insurance policy in order to comply with New Jersey law. Basic policies are the cheaper option, but may leave drivers vulnerable to financial loss.
In New Jersey, most drivers opt for a Standard policy. Standard Policies provide numerous options and opportunity to purchase additional coverage. It’s imperative that drivers understand the various types of coverage in order to select a plan that meets their needs. Below are the types of coverage provided by all New Jersey auto insurance providers.
- Personal Injury Protection (PIP) covers medical costs if you or someone else under your policy is injured in an accident, regardless of who is at fault. It can also be used to cover lost wages if you are unable to work during your recovery.
- Liability coverage is divided between bodily injury and property damage. Bodily injury protects you in the event you are sued by someone who is injured, or by the family of a person who dies in an accident you caused. Similarly, property damage liability coverage pays for any personal property that is damaged in an accident you caused, including automobiles, buildings, fencing or any other permanent structures.
- Uninsured and Underinsured Motorist coverage protects you and your property in the event you are involved in an accident caused by a person who does not have any coverage or does not have enough insurance to cover your damages.
- Collision coverage pays for damages to your automobile in the event of an accident.
- Comprehensive coverage protects you from events other than an automobile accident, including theft, vandalism, fire, flooding or simply a broken windshield. This coverage also pays out if you hit an animal that damages your vehicle.
Standard Vs. Basic Policies
The amount of coverage under each of these categories will vary depending on whether you purchase a standard or basic policy.
The average bodily injury liability coverage under a standard policy can have benefits that range between $15,000 and $250,000 per person and between $30,000 and $500,000 per accident.
Comparatively, the same liability under a basic policy is not included, but $10,000 in coverage can be added.
Basic policies are only recommended for people with few family responsibilities and few real assets. It should be noted these policies provide only minimum coverage. The New Jersey Department of Motor Vehicles says Basic coverage is intended for young people with little income. As your circumstances change and income increases, it’s advisable for you to purchase more coverage.
For example, without personal liability coverage, you could be responsible for medical bills, lost wages and other economic damages if you injure someone else. Your assets could be taken, including garnishing your wages if a legal judgment is levied against you.
While Basic coverage can provide a means for you to meet legal requirements when you cannot afford comprehensive coverage, you should carefully weigh the risks associated with only purchasing minimum coverage.
Factors Affecting Rates
There are numerous variables considered when calculating an individual rate for your auto insurance coverage. Some are within your control while some are not. Being aware of these variables can help lower your future risk assessment, thus lowering your rate. Consider the following factors that affect rates.
- Marital status
- Driving record
- Prior claim history
- Type of vehicle
- The way you use your vehicle
- The area in which you live
Tips for Saving Money
- Change your habits- If possible, drive less. Insurance companies frequently gauge your risk by how many miles per year you put on your vehicle. If you have a vehicle you only use during a certain time of year or as a leisure vehicle, be sure to tell the insurance provider.
Vehicles not considered your primary mode of transportation will cost you less.
- Drive safely- Exemplary drivers are often rewarded with lower rates. Avoid all traffic violations. Additionally, when purchasing a car, choose one with additional safety features or add an anti-theft device. Research what vehicles have low theft statistics and accident rates.
- Pay wisely- Insurance companies will usually offer discounts if premiums are paid all at once or automatically deducted from your bank account each month. There are usually fees associated with getting a monthly bill. Additionally, purchasing an annual policy will save money.
- Bundle your insurance- Many companies will offer discounts if you have more than one vehicle or if you use them for other forms of insurance, such as homeowner’s or renter’s insurance.
- Maintain a good credit score- If you pay your other bills on time, insurance companies will assume you are trustworthy and will pay your premiums on time. Overall, it shows you are a responsible person in general, which insurance companies will translate into a “low risk” driver.
- Reassess your needs- Life changes over time. Evaluate if you have enough coverage or if you are carrying too much. As cars get older, you may not need to carry quite as much coverage. Conversely, as your responsibilities change you may need to be better protected.
- Ask about other discounts- Many insurance carriers offer discounts to teens, students or graduates of certain colleges, or members of specific organizations.
- Stop smoking- In addition to health benefits, non-smokers are often given lower rates.
Mistakes to Avoid
There are certain actions that can cost drivers a lot of money. While most involve being responsible, the first involves deciding how cheap is too cheap when it comes to insurance coverage.
- Going with the cheapest- The least expensive coverage may leave you with a heavy financial debt in the event of an accident. Know your policy and choose wisely.
- Being dishonest- It’s not in your best interest to lie about your driving record. Insurance companies will eventually find out you were not honest and will increase your rates plus consider you dishonest and “higher risk.”
- Letting your policy lapse- By letting your policy expire, you not only put yourself at risk for not being covered in the event of an accident, but you are also likely to experience a rate increase when you try to reinstate your policy. Remember that driving uninsured, even for a day or two, can result in financial loss, legal fines, suspension of your license or registration and possibly jail time.
Drinking and driving- A DUI on your driving record can increase your premiums by up to 40 percent.
The New Jersey Department of Motor Vehicles recommends doing your homework, researching the type of coverage required for your vehicle and comparing several quotes from multiple providers to ensure you find the most affordable coverage for maximum protection.
Carefully weigh the amount of premium you can afford with the amount you could afford to lose in the event of an accident. Compare more than just prices. Carefully read policy options to ensure you are equally comparing insurance carriers.
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