3.1 New Jersey Auto Insurance Requirements
Key Takeaways
- Effective January 1, 2026, the Standard Policy minimum liability is 35/70/25 ($35,000/$70,000 bodily injury, $25,000 property damage), up from 25/50/25
- New Jersey is a no-fault state: Personal Injury Protection (PIP) is mandatory on every policy, defaulting to $250,000 on a Standard Policy
- Drivers elect the Limitation on Lawsuit (verbal threshold) or No Limitation option, which controls the right to sue for pain and suffering
- The verbal threshold permits suit only for six injury categories: death, dismemberment, significant disfigurement, displaced fracture, loss of fetus, or permanent injury
- The Basic Policy carries $5,000 property damage and $15,000 PIP, with bodily injury liability optional as a single $10,000-per-accident limit, not required
The New Jersey Choice System
New Jersey runs the most option-heavy auto market in the country. Every applicant makes three independent elections: policy type (Standard or Basic), PIP amount, and lawsuit threshold. Each election changes both the premium and the insured's legal rights, so producers must document the consumer's choices in writing. The governing statutes are the Automobile Insurance Cost Reduction Act (AICRA) and Title 39 of the New Jersey statutes.
2026 Minimum Limit Increase
The headline change for the 2026 exam: under P.L. 2022 c.119, the Standard Policy minimum liability rose on January 1, 2026 to 35/70/25. This is the single most-tested updated fact in the chapter.
| Coverage | 2024-2025 Minimum | 2026 Minimum |
|---|---|---|
| Bodily Injury per person | $25,000 | $35,000 |
| Bodily Injury per accident | $50,000 | $70,000 |
| Property Damage per accident | $25,000 | $25,000 (unchanged) |
Trap: Older study materials list 15/30/5. That was retired years ago. The progression was 15/30/5 → 25/50/25 (Jan 2023) → 35/70/25 (Jan 2026). If an option shows 15/30/5 as the current Standard minimum, it is wrong.
Standard vs. Basic Policy
| Feature | Standard Policy | Basic Policy |
|---|---|---|
| Bodily Injury Liability | 35/70 required (2026) | Optional $10,000 single limit per accident (not required) |
| Property Damage Liability | $25,000 required | $5,000 required |
| PIP | $250,000 default (reducible to $15k) | $15,000 medical only |
| Uninsured/Underinsured Motorist | Included, can match liability | Not offered |
| Collision / Comprehensive | Optional, available | Not available |
| Threshold options | Both available | No Limitation only |
The Basic Policy exists so cost-conscious or marginal drivers can be legally insured for a low premium, but it provides minimal protection. Producers should treat recommending it as an E&O exposure and obtain a signed acknowledgment of its gaps.
No-Fault PIP
Because New Jersey is a no-fault jurisdiction, an injured insured's own PIP pays medical bills regardless of who caused the crash. PIP on a Standard Policy defaults to $250,000 but the insured may buy down to $150,000, $75,000, $50,000, or $15,000 to save premium; $250,000 is always paid for certain catastrophic injuries (e.g., brain or spinal cord) even on a reduced policy.
| Policy | PIP Default | PIP Benefits Covered |
|---|---|---|
| Standard | $250,000 (reducible) | Medical, income continuation, essential services, funeral, death |
| Basic | $15,000 (fixed) | Medical only |
Worked example: A Standard insured selects the $50,000 PIP buy-down to save premium. She suffers a herniated disc costing $40,000 to treat. PIP pays the full $40,000 (within her $50,000 cap) regardless of fault. Had she chosen Basic ($15,000), she would owe $25,000 out of pocket. This illustrates why PIP election is a producer counseling priority.
Lawsuit Threshold Options
The threshold election controls when an injured insured may sue the at-fault driver for pain and suffering (non-economic damages). It does not affect the right to recover economic losses such as unreimbursed medical bills or wage loss.
Limitation on Lawsuit (Verbal Threshold)
Choosing the Limitation on Lawsuit option lowers premium but blocks pain-and-suffering suits unless the injury fits one of six statutory categories under N.J.S.A. 39:6A-8(a):
| Qualifying Injury | What It Means |
|---|---|
| Death | Fatal injury to the insured |
| Dismemberment | Loss of a body part |
| Significant disfigurement / scarring | Permanent, visible scar |
| Displaced fracture | A bone broken and out of alignment |
| Loss of fetus | Pregnancy loss from the crash |
| Permanent injury | Body part that will not heal to normal function, verified by objective medical evidence |
Memory hook: "Death, Dismemberment, Disfigurement, Displaced fracture, loss of Fetus, Permanent injury." A soft-tissue strain or whiplash that fully resolves does not qualify.
No Limitation on Lawsuit
The No Limitation option preserves the full right to sue for any injury, costs more, and is the only threshold available on the Basic Policy. It is also the default if the applicant fails to make an election in writing.
Scenario: Two drivers carry the verbal threshold. Driver A suffers permanent nerve damage (a permanent injury) — she may sue for pain and suffering. Driver B suffers a sprained ankle that heals in six weeks — he is barred from a pain-and-suffering claim, though his PIP still pays his medical bills.
Uninsured and Underinsured Motorist Coverage
Uninsured Motorist (UM) protects against at-fault drivers who carry no insurance; Underinsured Motorist (UIM) applies when the at-fault driver's limits are lower than the insured's own UIM limit.
- On a Standard Policy, UM/UIM is included and may be written up to the insured's liability limits but never lower than the statutory minimum.
- UIM in New Jersey uses a "limits comparison" (not a gap) approach: UIM responds only if the insured's UIM limit exceeds the tortfeasor's liability limit.
- The Basic Policy does not offer UM/UIM, a major coverage gap.
Other Mandatory Elements
| Item | Requirement |
|---|---|
| Property damage liability | $25,000 Standard / $5,000 Basic |
| PIP | Mandatory on every policy |
| Insurance ID card | Must be kept in the vehicle; failure is a fineable offense |
| Named-driver exclusion | Permitted only with written consent |
Exam tip: A driver who lets coverage lapse faces license/registration suspension plus reinstatement fees, and is barred from collecting non-economic damages even as an innocent victim under the "no pay, no play" rule.
Effective January 1, 2026, what are the minimum liability limits for a New Jersey Standard auto policy?
A New Jersey driver elects the Limitation on Lawsuit (verbal threshold) option. Which injury allows that driver to sue for pain and suffering?
What PIP coverage does a New Jersey Basic Policy provide?