How Auto Insurance Works in New Jersey

Burlington County Auto Insurance

New Jersey Auto Insurance
If you drive in New Jersey, the law requires you have auto insurance. Your auto policy provides for many different types of coverage with a variety of options, deductibles and limits to choose from. 

Auto insurance companies tell you to get a quote online and promise that you’ll save hundreds of dollars. Some even boast about providing only the absolute minimum coverage the law allows. What they don’t tell you is what happens when you are injured in an accident and actually need your insurance to cover your medical bills, lost wages and pain and suffering. Buying cut-rate insurance could leave you with thousands of dollars in out-of-pocket expenses and inadequately compensate you for injuries caused by the negligence of another.

When choosing an auto policy and coverage options, the primary concern shouldn’t be how quickly you can get a quote or how much you can save, but whether the coverage will make you whole in the event you are injured in an auto accident. 

Based on their extensive knowledge and experience, the personal injury attorneys at the Costello Law Firm have put together a primer on auto insurance in New Jersey, including explanations of the various coverage options and limits and how these will impact you if you are involved in an accident. 

IMPORTANT: You can change your coverages and policy limits at any time. You do not need to wait until your current policy is up for renewal to make changes. 

If your current coverages and limits to do meet the recommendations we’ve outlined below, we urge you to contact your auto insurer or agent to change your policy in include our recommended insurance options and limits.

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Commonly Used Insurance Terms


LIMITS – This means the maximum amount an insurer will pay on a particular kind of claim. These vary greatly depending on the type of coverage and requirements under New Jersey law. If you have medical bills or damages that are in excess of the limits you selected, these costs will be your responsibility. 

PREMIUMS – This is the amount of money you are billed by the insurance company to buy and maintain your coverage. 

DEDUCTIBLES – The amount of money you have to pay out of pocket before your insurance company will pay toward an accident or loss. For example, if your car is damaged in an accident where you are at fault, and your collision coverage deductible is $500.00, you will have to pay the first $500.00 toward your car’s repair bill. The insurance company will pay whatever remains, but only up to the limits you have selected. The higher the deductible you select, the more money comes out of your pocket before your insurance company pays a dime. 

TORT THRESHOLD – Also called the “Limitation on Lawsuit” or “Verbal Threshold.” When you select this option on your auto policy, you give up your ability to sue for injuries suffered in an motor vehicle accident unless those injuries fall into very specific categories, such as disfigurement or displaced fractures. Other conditions that could be very painful and debilitating, such as herniated discs, radiculopathies, ligament tears and the like may not be qualify under these categories, leaving you without the ability to sue the at-fault driver for the pain and decrease in quality of life these injuries cause. 

Types of Insurance Coverage


This is the insurance that covers you if you cause an accident resulting in injury or damage to someone else. There is liability insurance for property damage, or the damage caused to another person’s car or other personal property in an accident. There is also liability insurance for bodily injury, which covers you if someone else has been hurt in an auto accident that is your fault. 

The higher the limit you choose for your liability coverage, the less chance that you will be financially responsible for injuries to others from an automobile accident that was your fault. The minimum limits allowed in New Jersey are $15,000.00 per person or $30,000.00 per accident (increasing to $25,000.00 and $50,000.00 in 2023). These minimum limits are inadequate protection.

Bodily injury liability limits of $100,000.00 per person and $300,000.00 per accident is strongly recommended by the Costello Law Firm. 



This coverage protects you against damage or injury caused by a driver that is either uninsured or has inadequate coverage to compensate you for your injuries. If the at-fault driver is uninsured or underinsured, your own insurance company will pay for personal injuries or damages you sustain up to the coverage limits you have selected. Many different limit options are available and if you choose the minimum limits, you may not be entitled to anything in the case of an underinsured driver who also only carries minimum liability coverage.

Uninsured and Underinsured limits of $100,000.00 per person or $300,000.00 per accident is strongly recommended by the Costello Law Firm.



In New Jersey, your own automobile insurance pays for any medical treatment you need for injuries sustained in an automobile accident as well as a certain amount of income replacement for missed time from work. These benefits are available whether the accident is your fault or not, which is why these benefits are also known as “No-Fault” coverage. 

IMPORTANT: Using your PIP coverage to pay for medical bills after an accident WILL NOT increase your premiums!

There are different aspects of PIP coverage, but by far the most important is Medical Expense Benefits. This coverage is similar to how your personal health insurance works. Your auto carrier will pay your healthcare providers directly for medical treatment you need. The requirements and procedures that doctors and other healthcare providers have to follow to be properly paid through PIP insurance are numerous and highly technical. As such, a number of doctors, including many primary care physicians, will not treat auto accident victims. The Costello Law Firm has excellent relationships with many highly skilled healthcare providers that are also experienced in dealing with PIP coverage. 

Medical expense benefits are available in five coverage options: $250,000, $150,000, $75,000, $50,000, and $15,000.

The Costello Law Firm strongly recommends selecting $250,000 limits, or at the least, one of the coverage options higher than $15,000. If an injured person requires diagnostic imaging studies, injections and/or a surgical procedure as a result of injuries they sustained in an auto accident, it is not difficult to quickly accumulate more than $15,000 in medical bills in fairly short order. In many instances, a trip to the emergency room with a handful of imaging studies may account for a large percentage or even all of the $15,000 limit.

There is a deductible, which you select, ranging from $500.00 to $2,5000.00. Again, this is the amount of money you will have to pay before your insurance company is responsible to pay. You will also be responsible to pay 20% of the first $5,000.00 in medical bills as a co-payment. You will owe this money to the doctor or healthcare professional that is treating you. After $5,000.00, auto insurance will pay 100% to your healthcare providers. If the accident is not your fault, you may be able to recover these out-of-pocket expenses from the at-fault driver.

Don’t ever choose the health care primary option for PIP!  

You will often see this pushed by insurance companies and agents as a huge “cost savings” option. Put simply, the healthcare primary option doesn’t work. Selecting your health insurance to act as primary over PIP will likely cause a whole host of problems. When you choose this option, your health insurance is supposed to be obligated to pay the medical bills for your accident-related treatment and your auto insurer is only responsible to pay what your health insurer does not. The problem is that most health insurances refuse to pay for any treatment related to an auto accident even though they are obligated to under New Jersey Law. Some plans governed by federal law explicitly exempt auto accidents from coverage. 

Auto insurance companies often don’t know how to properly administer health care primary plans, and medical bills end up getting delayed indefinitely or denied for no valid reason. MEDICARE and MEDICAID cannot be used for the health care primary option though many auto carriers routinely allow their insureds to select the option knowing its improper. Further, if your health coverage is canceled or ends up excluding coverage for auto-accident-related treatment, you could get hit with a monetary penalty even though you did nothing wrong. 

Additionally, many health plans purchased through state and federal exchanges have very high deductibles  – some in the $4,000 or $5,000 range. These deductibles are significantly higher than those offered for most auto policies. Someone thinking they are getting a great deal on their auto insurance by selecting a health care primary PIP policy may end up being stuck with a huge out-of-pocket bill when, if they had paid just a little more for the PIP primary policy, they would have much less money coming out of their own wallets for the medical care they need following an auto accident.

The auto accident injury attorneys at the Costello Law Firm recommend a standard PIP-primary policy and DO NOT RECOMMEND the Health Care Primary Option. Always choose PIP primary!

Income Continuation Benefits are wage-replacement benefits for those who are employed and would be working but-for the fact they were injured in an accident and are now physically unable to work. “Default” coverage is a weekly payment of $100, subject to a maximum limit of $5,200 (52 weeks’ worth of payments). Many different income continuation coverage options are available. Regardless of the weekly benefit amount chosen, payments can’t be greater than the injured person’s net income. Thus, while you may select an $800 weekly benefit, if you only net $500 a week, $500 is what you are going to get.  If State disability benefits are available to the injured person, these must be exhausted before the injured person can collect income continuation though PIP.

The Costello Law Firm recommends selecting a coverage option that comes the closest to your normal net weekly income.

Have additional questions about what insurance coverages you should select, contact us! We are happy to help answer any questions you may have.



1213T High St. Burlington, NJ 08016 (609) 386-5400