New Jersey’s high population density and no-fault insurance system drive monthly auto insurance premiums above the national average — that’s the bad news. The good news is with a little bit of research, you can find the policy that’s right for you and save hundreds of dollars in the process.
Quotes are highly personalized, so it’s impossible to say one company is the absolute best for everyone. Insurance rates are based on algorithms that calculate your individual risk as a driver. That risk profile includes specific data like the make and model of your car and your driving record, but it also includes personal factors that are less directly related to your driving record, including your age, your credit score, and your ZIP code. Even if you know the risk factors that you’re triggering, it’s not easy to predict which company will be the cheapest; every insurance company uses its own formula that weights those factors differently. The only way to find the best company for your particular scenario is to get quotes and compare them.
Our Top 5 Picks for the Best Cheap Car Insurance in New Jersey
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These five companies have been chosen for their top-shelf customer service and financial ratings. These factors are incredibly important because they speak to each company’s ability to actually pay claims and to handle them swiftly and effectively. Who wants to be stuck in a squabble with their provider in the heat of an accident?
These picks required an “excellent” or “superior” financial stability grade from A.M. Best, a top financial-strength rating agency, and high customer satisfaction ratings from J.D. Power, a global leader in customer satisfaction surveys.
Of the five quotes, Progressive is the best car insurance option. At $1,078 a year, it’s nearly $30 less than the next-best policy. Even that second-best rate from Geico is a steal compared with the $1,704 Allstate wants to charge. With such a difference in price, you can purchase significantly higher coverage from Progressive and still pay less than Allstate’s rate for minimum coverage. In that case, it’s definitely worth investing in better coverage before paying more for the exact same plan.
New Jersey’s Minimum Coverage Requirements for 2020
New Jersey structures its auto insurance policies differently than most other states. Residents have a choice between a basic or a standard policy. The basic policy is cheaper, but it provides limited coverage. You must have at least $15,000 of personal injury protection, with a limit of $250,000 for serious injuries, and $5,000 of property damage liability coverage.
The standard policy requires bodily injury liability coverage of $15,000 per person and $30,000 per accident, plus $5,000 of property damage liability coverage. It also requires uninsured motorist coverage of $15,000 per person and $30,000 per accident, as well as personal injury protection in the same quantities required by the basic policy. If you chose a basic policy, it’s likely to be cheaper, but it also requires that you relinquish your unlimited right to sue if you’re involved in an accident; you’ll be able to sue for medical bills and lost income, but you can sue for pain and suffering only in cases of particular and severe injuries.
New Jersey also offers a Special Auto Insurance Policy (SAIP) for individuals who are eligible for Federal Medicaid with hospitalization. This is a limited policy that costs only $365 a year, but it covers only medical expenses that result from a car accident. It doesn’t cover damages to any property involved in the accident; that means no coverage for your car or for the other driver’s car.
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Why are New Jersey’s rates the way they are?
New Jersey’s auto insurance premiums are 23 percent above the national average, partly because it has the highest population density of any state in the country. This means more people living in closer quarters, and to insurers, that translates to a greater risk of accidents.
One study also found New Jersey to be one of the most expensive states for auto repair. In the event of a claim, insurers are going to have to pay more in New Jersey than they would for a similar claim in a less expensive state. The insurance companies pass that extra expense along to drivers in the form of higher monthly premiums.
New Jersey’s no-fault auto insurance system also contributes to the high rates. Under this system, claims are handled by your own insurance, regardless of who was at fault in an accident. This approach was intended to reduce auto insurance premiums, although in practice, rates in no-fault states are higher than in tort states.
Only 12 states in the nation have no-fault systems and only three, including New Jersey, have choice no-fault systems, enabling consumers to choose between that coverage and the more traditional tort insurance. The limited tort (no-fault) option is cheaper, but it also limits your ability to sue for damages. You always retain the ability to sue for medical bills or lost income, but you give up your right to pursue damages for pain and suffering. The full tort option enables you to retain that right, but only you can decide if that’s worth paying extra on your monthly premiums.
Should you have more than minimum coverage?
The state minimums are so low that it’s a good idea to purchase a higher coverage limit if you can reasonably afford it.
Here’s why: The average cost of a disabling, nonfatal injury is almost $94,000. If you get into a serious accident, and you have only the minimum coverage, you’ll still be left with a hefty bill after your insurance has paid its portion. You’ll likely be sued for the rest and end up emptying your bank account to pay for the damages. That’s a scenario no one wants to end up in, so it’s better to go with higher coverage limits if you can.
Do you need both collision and comprehensive insurance?
When deciding whether you need collision or comprehensive insurance, keep in mind the area where you live, the value of your car, and your driving style. Collision insurance is useful if your vehicle hits an object or another vehicle, if your car rolls over, or if your vehicle is damaged due to road conditions, such as potholes. On the other hand, comprehensive insurance covers objects falling on your car, an animal hitting your vehicle, and damage to your car due to vandalism or natural disaster. If you have a loan for the purchase of your vehicle, you will likely be required to carry both policies.
What happens if you don’t have any insurance?
New Jersey is tough on uninsured drivers, and if you get caught, you’ll wish you’d just paid the premiums. A first offense will earn you a fine of somewhere between $300 and $1,000, plus the suspension of your driver’s license for one year. You’ll also be sentenced to some period of community service as determined by the court. Repeat offenders can face up to $5,000 in fines, a two-year suspension of their licenses, 30 days of community service and 14 days in jail. The basic policy was introduced to make it more affordable to get enough coverage to be legal.
Do you need SR-22 insurance?
If you have lately had a string of traffic violations, if you have been caught driving under the influence, or if you have not been carrying auto insurance, you may be required to pick up SR-22 insurance. You can purchase this policy through your regular insurance provider. However, the extra paperwork required to file this form is extensive, and you’ll likely find that SR-22 insurance is very expensive. If you continue to have a clean driving record for a good amount of time, you will likely be able to drop your SR-22 insurance.
Even If You’re Happy, It’s Best to Shop for a New Policy Every Couple of Years
Auto insurers don’t just care about risk when calculating rates anymore; they also consider how likely you are to leave them for another company. They’ve got big data that includes information about your online shopping habits, how long you’ve been with your cellular carrier, and even your social media activity on their side.
And they’re using it not only to determine your individual risk (or how much they’re likely to pay out on your behalf); they’re gauging the likelihood that you’ll apply for quotes somewhere else. That’s what they call the “price elasticity of demand.” In other words, it’s how willing you’d be able to stretch and pay more. They use the data to charge you as much as they think you’re willing to pay — a process called price optimization. If they don’t expect you to shop for a better deal, they’ll sneak a few extra dollars into your monthly premiums. Loyal customers are likely not getting rewarded for their loyalty; they’re often taken advantage of because they’re less risky to dabble with than people who frequently apply for quotes.
Insurance companies want to maximize their profits, but they also want to keep your business. If they fear you’re going to move to a competitor, they won’t take the chance of hiking your rates. It’s smart to shop around at least every year or two, if only because it prevents you from being marked as someone willing to pay a higher rate.
More than a dozen states have outlawed price optimization, saying that the use of non-risk related data in rate-setting results in discrimination. However, New Jersey hasn’t yet followed suit. For now, it’s up to you to make sure you’re not being charged more than necessary simply because your company has data to show you’re not averse to a price increase.
If you’re a good driver, look for discounts that are available for people who haven’t filed any accident claims. You can often find these types of discounts, even if you have a low credit score. If your score is below 620, look for ways to increase your score or continue to shop around until you find a company that doesn’t rely on credit scores to set rates. If you have a new driver on your policy, you’ll likely face price increases simply because new drivers don’t have any records that prove that they will be good drivers. Luckily, this will change over time, just like your credit score, and you’ll eventually have an opportunity to reduce your rates. Young drivers can also qualify for good student discounts.
Best Car Insurance in New Jersey
No one company provides the best car insurance for everyone. The only way to find the right fit for you is to get quotes and to compare their prices and coverages. It sounds like a lot of legwork, but it doesn’t have to be. You can find savings if you’re willing to look a little bit.