High-Risk Auto Insurance in New Jersey Explained

From Ocean City to Atlantic City, Long Beach Island to the Jersey Shore, Jersey City to Princeton, and all the way to Newark, there are plenty of adventures in the Garden State for those with an adequate auto insurance policy and enough gas in the tank. Driving without auto insurance is illegal in New Jersey, and those who fail to comply with the law may be considered high-risk drivers for several years.

Maintaining an adequate New Jersey auto insurance policy is crucial for all drivers in the state, especially those on a tight budget. While forgoing coverage may be a tempting way to save in the short term, let’s look at how it can cost drivers in the future.

All drivers must maintain a minimum amount of auto insurance in New Jersey, lest they risk being considered high-risk drivers. It’s essential to clarify that high-risk insurance isn’t a separate type of coverage or policy but rather a category in which insurers place drivers with a poor driving record or insurance history. Drivers in this category likely have a history of driving without insurance, committing severe traffic violations, or filing multiple claims. 

When insurers bind policies with drivers, they look at how likely the driver is to file a claim. If a driver is at an above-average risk of filing a claim, the insurer may consider them a high-risk driver and either charge them higher-than-average premiums or refuse to bind a policy with that driver. 

Insurers use several factors to determine a driver’s risk, like their insurance history, driving record, gender, age, and ZIP code. If any of these factors lead insurers to believe a driver is high-risk, they may see higher-than-average premiums as insurers use premiums to compensate for a driver’s risk of filing a claim. 

While it’s obvious why a driver with a poor driving record or a history of driving without insurance may be considered high-risk, it’s not quite as obvious what non-driving-related characteristics like one’s age or gender have to do with one’s risk of filing a claim. Insurers use statistics gathered from different groups of drivers to draw conclusions about the risk factors certain groups carry when they’re behind the wheel.

For example, according to the CDC, teenage boys have a high statistical likelihood of getting into or causing accidents. Thus, many teenage boys pay higher-than-average premiums even without much of a driving record or an insurance history.

The good news is that premiums vary in cost over time. While some drivers may pay above-average premiums at some points in their lives, they’re likely to pay average or below-average premiums at other times, depending on several factors. The average full coverage premium in the Garden State costs about $1,900 annually, or about 15% more than the national average of $1,670 annually. 

While the cheapest policy in the state may be a minimum coverage policy with premiums well below the national average, that may not always be the best policy for every driver, especially high-risk drivers. High-risk drivers should always err on the side of caution when it comes to auto insurance, and part of being cautious with one’s insurance policy is carrying perhaps more coverage than necessary.

Car insurance is highly subjective based on the driver, as premiums vary from person to person. While a minimum coverage policy is certainly legal, a full coverage policy may be a better, safer option for most drivers. Binding a full coverage policy with one of the top insurers in the state is a great way for drivers to ensure they’re getting the most bang for their buck without sacrificing coverage for their savings. 

The PAIP, or the Personal Auto Insurance Plan, is an assigned-risk New Jersey automobile insurance plan for high-risk drivers. The PAIP is a pool in which drivers are entered and chosen by an insurer if they have difficulty binding with a voluntary insurer. In the PAIP, drivers are assigned an insurance company, and neither party can reject the other.

The rates in the PAIP pool are stabilized, meaning all drivers enrolled in the program will receive the same rate, regardless of what insurer they’re assigned to. Drivers enrolled in this program may face higher-than-average premiums, even if all drivers in the program pay the same rate.

Generally, high-risk drivers will only stay with the insurer to which the PAIP assigns them for three years. Once the three years are up, it’s ideal that a high-risk driver’s insurance record has been built up, and they’ll be able to find an insurer on the voluntary market and perhaps lose their status as a high-risk driver. However, drivers who must remain in the PAIP will be re-enrolled and assigned a new insurer after three years.

Drivers enrolled in the PAIP must carry the same coverage as those on the voluntary market. Auto insurance laws in the Garden State require drivers to choose either a basic or a standard insurance policy, each with its own mandatory minimums. With a basic policy, drivers must have at least $10,000 in bodily injury liability per accident, $5,000 in property damage liability per accident, and $15,000 in personal injury protection (PIP) per accident. 

Drivers who select a standard policy must have at least $25,000 in bodily injury liability per person, $50,000 in bodily injury liability per accident, $25,000 in property damage liability per accident (25/50/25 liability coverage), the same 25/50/25 limit of uninsured and underinsured motorist coverage (UM/UIM), and $15,000 in PIP. Those who lease or finance their vehicles may be required to carry comprehensive and collision coverages.

Insurance in New Jersey isn’t cheap; in fact, it’s one of the country’s most expensive states for auto insurance. While finding a cheap auto insurance policy may be tough for most drivers in the state, it may prove even more difficult for those with a poor driving record.

Since New Jersey is a no-fault state, drivers must carry a first-party medical benefit (FPMB) called PIP. FPMBs, especially PIP, are expensive coverages because they offer an expansive range of coverage. However, while rates may be above average for high-risk drivers, many insurers offer stackable discounts that may help drivers lower their premiums. 

Many insurers offer standard discounts like bundling discounts, multi-car discounts, or student discounts that require policyholders to meet criteria. Insurers may also offer enrollment-based discounts requiring policyholders to take an active role in their savings, like enrolling in a usage-based telematics or pay-per-mile program. Generally, enrollment-based discounts offer more savings than criteria-based discounts.  

Whether you’re searching for a great deal, high-risk insurance, or short-term insurance in New Jersey, the best way to weigh all your options is to get and compare quotes online. By getting and comparing quotes online, you can see all your options in one place to make the best choice for your needs and wallet and maybe have some funds left over for a lap around one of the casinos in Atlantic City.

Lucky for you, we love quotes here at Clovered. We even have a free quoting tool you can use to access your quotes in no time. If you prefer to speak with an agent, you can chat with one of our licensed agents at 833-255-4117 or [email protected].