TRENTON – New Jersey Department of Banking and Insurance Commissioner Ken Kobylowski today offered consumers some basic tips for choosing or renewing their auto insurance throughout 2014. Researching options carefully now will save consumers premium dollars down the road.
“As with any buying decision, auto insurance consumers need to understand the product before they pay for it,” said Commissioner Kobylowski. “This Department’s mission includes helping consumers understand auto insurance and how to best look for coverage that fits their needs. It is important for New Jerseyans to remember that they have the right to change carriers and policy coverage at any time regardless of their renewal date.”
What is in an auto insurance policy? Before shopping around, understand what is being sold.
- Liability – Coverage that protects an operator who is legally responsible for an accident, such as a rear end collision with a stopped vehicle, is called liability insurance. This includes payments for bodily injury and property damage. Bodily injury coverage includes claims and lawsuits by people who are injured or die as a result of an accident caused by a policyholder. Property damage coverage pays for claims and lawsuits by people who sustain damages to their car or other property a result of an accident caused by the driver. In New Jersey the minimum required liability coverage is $5,000 in property damage for a basic policy and a minimum of $15,000 for bodily injury per person, $30,000 total bodily injury per accident. There are a variety of coverage levels above the minimum levels which will cost more.
- Personal Injury Protection (PIP) – Medical expenses for consumers and their families following an auto accident is called PIP. The default amount carriers are required to offer drivers is $250,000. However, consumers may purchase less and will see a savings as a result. The minimum required coverage is $15,000.
- Uninsured Motorist/Underinsured – This coverage pays up to the limit of your policy selected if you or your family members are injured or your car is damaged and the person responsible has no insurance or not enough coverage.
- Collision and Comprehensive – Collision coverage pays for damage to a covered driver’s auto as the result of colliding with another car or object. Comprehensive (not collision) pays for damage to a covered car due to risks such as theft, flood, fire or vandalism. These coverage items are voluntary and involve selecting a deductible. This is the amount the policyholder pays before the policy starts to pay out claims. Usually a higher deductible chosen lowers the premium paid.
Comparison shopping for auto insurance takes time, but consumers who do often find significant savings. Follow these steps when insuring a new car or looking for replacement insurance coverage on a car already owned.
1. Choose a policy. A standard policy provides several coverage options and a chance to buy additional protection. A basic policy yields minimum protection and should only be considered by consumers with few or no assets. A Special Automobile Insurance Policy provides only emergency and catastrophic care and is available solely for federal Medicaid recipients.
2. Choose your options, limits and deductibles. Options refers to available coverage as discussed above. Limits are the maximum amount a policy will pay. Deductibles are the amounts the consumer pays for any claims filed. Higher deductibles may reduce the premium paid.
3. Choose your healthcare option and, if needed, a PIP limit, PIP deductible and, if desired, additional PIP coverage. Consumers have a wide variety of PIP choices including to elect their own health coverage as the primary provider in case of an accident with injuries. Consumers may save on premiums with that selection, but should first verify their healthcare insurance covers auto accident injuries. Higher PIP deductibles may also save on premiums while additional coverage is available for a higher cost.
4. Select a limit of Uninsured/Underinsured coverage. This is coverage for accidents caused by someone with no insurance or not enough insurance to pay for a consumer’s loss. A lower limit may reduce premiums.
5. Choosing Collision or Comprehensive Coverage and deductibles. While collision or comprehensive insurance will likely increase premiums, the coverage may be desired by consumers who buy new or lightly used vehicles or if financing. It may be required by the lienholder when a consumer finances the purchase. Consumers with older vehicles may decide to drop collision or comprehensive coverage and will likely save on premiums. Deductibles ranging from $100-$500 may increase premiums while larger deductibles may reduce premiums. A lienholder may require a minimum deductible.
6. Do you want unlimited right to sue? Choosing a limited right to sue may reduce a consumer’s insurance premium in exchange for restricting rights to sue for pain and suffering. This non-economic loss would be barred by choosing a limited right to sue, except for specific permanent injuries including a dislocated fracture or significant scarring. This choice would not affect some economic losses for injuries or medical expenses.
Once a consumer decides on coverage and policy type, it is time to get quotes from an agent or carrier. Remember to make certain each quote is for exactly the same coverage. At least three quotes are recommended. It is also important to remember that specific factors affect the cost of auto insurance.
- Driving record. Accumulated points for accidents and moving violations may be reduced by taking a driving course recognized by the State.
- Vehicle type. The make and model of a covered auto will impact premiums. More expensive cars tend to generate a higher premium.
- Gender and age.
- Geographic location.
- Coverage chosen.
Inquire about Discounts. Programs vary between carriers. Consumers who make sure that they are taking advantage of every available discount will likely save on premiums. If already insured and considering switching, consumers should make certain they are getting all available discounts. These are some examples of discounts available.
- Short commute. Many carriers will offer a discount if the driving distance to work is relatively short. These programs vary.
- Multiple cars. Married couples and families insuring all cars with one carrier may save.
- Insuring auto and homeowner’s with the same carrier. Bundling discounts are often available when combining home and vehicle coverage with the same company.
- Safe driver. Many carriers reward drivers each year they are covered without tickets or accidents.
- Good student. Teenage drivers with good grades could decrease their insurance costs.
- Ring in new discount programs. Each New Year brings new programs designed by many carriers. Consumers who double check yearly on recently available discounts may be pleasantly surprised by savings.
“Remember that auto insurance is required in New Jersey, so please do not drive without it,” said Commissioner Kobylowski. “Make sure the agent or carrier you talk to is licensed by the state of New Jersey. If you have questions on any aspect of your coverage, do not hesitate to ask your agent or carrier. You may also contact this Department for guidance or with questions.”