New Jersey Car Insurance FAQ

Our New Jersey Car Insurance FAQ can help you lower your auto insurance costs

1. Do I need an Auto Insurance Policy?

2. What is a deductible?

3. If someone else is driving my car, are they covered under my insurance?

4. Do I need automobile insurance?

5. How does an insurance policy protect me?

6. What should I know about auto insurance?

7. Who do I contact after an auto accident?

8. Are there any limitations on what an insurance company can charge?

9. Can an insurance company cancel my policy without my consent?

10. Can I cancel my policy at any time and will there be a penalty?

11. If I receive a DUI, can my insurance company raise my auto insurance rates?

Do I need an Auto Insurance Policy?

Your automobile is a valuable asset, which could be very expensive to repair or replace if is damaged. Part of what auto insurance does is to pay for the repair or replacement of a vehicle which is damaged either as a result of your driving or from other causes not related to driving, such as theft or storm damage. Without insurance, many people would be unable to replace vehicles that are stolen or become severely damaged. Auto insurance also covers your legal liability, which could arise if you injure another person or damage another person's property with your vehicle. Depending on the extent of the damage or injury caused, the potential amount for which you could become liable is far in excess of the value of your automobile, perhaps in the hundreds of thousands of dollars or more. Auto liability insurance pays the damage for which you become liable, up to the dollar amount of liability coverage that you purchased. Without auto liability insurance, all of your personal assets could be at risk.

What is a deductible?

A deductible is the dollar amount the insured must pay when he files a collision, comprehensive or some in states uninsured motorists claim. Example an insured has an at fault accident with damage of $1,000.00. If his deductible is $250.00, his insurance company will issue him a check for $750.00. The higher the deductible will lower the premium.

If someone else is drives my car, are they covered under my insurance?

Your insurance policy follows your car. There may be specifics with each individual carrier with regards to this. Generally they must have your permission to drive to be covered while driving your car. All drivers in the house must be listed on the policy unless they have there own policy.

Do I need automobile insurance?

Many states have laws which require that you must prove your financial ability to pay a specified level of damages in order to register a vehicle or renew license plates. The only way for most people to satisfy this requirement is to have an automobile liability insurance policy for a specified minimum amount of coverage, usually referred to as the "minimum limits" or "compulsory limits" of coverage. If you have an auto loan or if you lease your vehicle, the loan company or leasing company will require that you have insurance to cover the repair or replacement of the vehicle in the event it is damaged. Normally you will be required to name the loan company or leasing company as a "loss payee" on your policy, which means that if the vehicle is damaged, any insurance payment will go to the loan company so it can assure the money, is used either to repair the vehicle or pay off the loan balance.

How does an car insurance policy protect me?

Insurance policies offer protection against economic loss, that is, loss or damage which can be measured in purely financial terms and compensated by money. For example, an insurance policy can pay for the cost to repair or replace a damaged automobile. The purpose is to place the injured party, as nearly as possible, in the same financial position as if the loss had not occurred. It is important to understand this limitation of car insurance, since there are many types of losses which can not be compensated by money. For example, insurance cannot replace a life or take away the emotional injury or pain which often accompanies an accident.

What should I know about auto insurance?

Some people think of it in terms of "us versus them." Some of us have lives and property worth protecting and believe that there are people who have nothing, will never amount to anything and will take advantage of us anytime they can. Those of us who care purchase insurance for what we have to protect and keep it. In determining what Liability Limits you should purchase, you need to consider the amount of exposure that you have. As a general rule, the more property and wealth you own, the greater your exposure is, and the greater the need for protection against claims from third parties. Often, liability limits are set as a combination of numbers, such as 15/30, which means coverage of loss of up to $15,000 per person and up to $30,000 for all injuries, which occur in a single accident. Many states require a minimum amount of third party liability insurance be purchased before a you may drive a vehicle on public roads. This is referred to as the minimum liability limit.

Who do I contact after an auto accident?

Depending upon the nature of the accident and the extent of the damages and injuries involved, a series of auto accident reports must be filed. Reports typically must be filed with three sets of organizations: Car insurance company - Most auto insurance companies require their policyholders to promptly report every auto accident. Most car insurance policies require Notice of Loss be provided to the insurance company. When you are involved in an accident, the terms of most insurance policies state that you must contact your car insurance company and tell them about the accident. Should you fail to tell your insurance company about an accident in a timely manner, the insurance company may try to deny coverage for the occurrence. The car insurance company will want to gather all of the basic information concerning the accident for its records. Sometimes the insurance company will want your authorization to make a recorded statement concerning the accident. We suggest that if you or your passengers were injured in the accident, or believe the insurance company will try to claim "you're not covered". However, bear in mind that failure to provide information to your insurance company on a timely basis -- your policy will set out how quickly you must notify the company. Failure to comply could result in loss of coverage for the accident.

Police - The law of the state where the accident occurs may require a police report to be filed. Generally if any personal injury occurs in an auto accident, a police report must be filed. A police report generally also is required when property damage exceeds a certain dollar amount (often $200 to $500). Some local police only take certain auto accident reports over the telephone, some require a trip to the station house. To be safe, at least a telephone call to local police should be made shortly after an auto accident to determine local practice and the information you are required to provide.

Department of Motor Vehicles (DMV) - Some state DMVs maintain auto accident reports. The requirement for these reports differ between the various states. For instance, California requires every operator of a vehicle involved in an accident to file a "SR-1" whenever there is an accident with personal injury or property damage in excess of $500. Typically this report must be filed within 5 or 10 days of the accident. Failure to file such a required report could lead to suspension of your driving privilege. Therefore, your driver's license could be taken away from you, regardless of fault, if you do not promptly file a report with your state's DMV. If you or someone was injured, it may make sense to speak to a lawyer BEFORE filing that report! Visit our list of local DMVs for more information.

Are there any limitations on what an insurance company can charge for insurance?

For each type of policy, car insurance companies have a range of premium levels that may be charged based on various factors that are considered at the time an application is submitted. For example, the premium for an auto insurance policy will vary depending on the applicant's driving habits, such as number of miles driven and whether the auto is used for business, the age and model of the vehicle, and whether the applicant has recently been convicted of a traffic violation. fe insurance policy will vary depending on the applicant's age and health condition. State law often limits the specific rating factors that may be considered for certain types of insurance. The rates and rating factors for most types of insurance must be filed with the insurance regulatory agency for each state where the insurance is to be sold.

Can an insurance company cancel my policy without my consent?

Once a policy is issued, the car insurance company except for reasons specifically stated in the policy can not cancel it, and state laws usually limit what a company can include in the "cancellation" provisions of its policies. Typically, policies will be subject to cancellation only for failure to make required premium payments or for some type of serious misrepresentation or fraud by the policyholder. Most auto insurance policies are issued for a stated policy "term", such as six months or one year. The limitation on cancellation mentioned above applies only during the policy term. Auto insurance companies usually can decide to discontinue or "non-renew" these policies at the end of the term for any reason except a reason that would be prohibited by law. In most states, an insurance company must give the policyholder a written notice at least 30 days prior to the end of the policy term if it intends to non-renew a personal auto insurance policy.

Can I cancel my policy at any time and will there be a penalty?

A policyholder may elect to cancel an insurance policy at any time by giving notice to the car insurance company. In some cases you may be required to return the original policy or sign a "policy release", and of course you will be responsible for any premium earned through the date of cancellation. Sometimes there are financial penalties for early cancellation by the policyholder. Most property and liability policies require what is called a "short rate" penalty when a policyholder requests cancellation, which means that the company retains a disproportionate amount of the premium. For example, if you have a one-year policy and you request cancellation after six months, the "short rate" penalty would allow the company to retain more than one-half of the annual premium. A policy must clearly describe any applicable cancellation penalties or surrender charges.

If I receive a DUI, can my car insurance company raise my auto insurance rates?

Absolutely, but not always. The results will vary from state to state, and may depend on such factors as how long you have been insured with the company and your past driving record. If you are dropped, you will have to shop around for a new insurer and chances are your rates will be sky-high. Your increase in insurance rates can constitute the single biggest financial cost of being convicted for drunk driving. Check with your local DMV for more information.