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Insurance Rates in New Jersey

Shopping for automobile insurance involves a bit more than just looking for the lowest price. Insurance premiums are regulated by the Division of Insurance in the State of New Jersey. Regulations have been put in place to ensure fairness across the board for both consumers and those assuming risk.

Insurance companies, agencies, producers or other organizations issuing insurance policies must comply with these regulations. Recent reforms have succeeded in building a competitive marketplace in which consumers benefit from lower premiums.

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Consumer Protections Exist

The need for oversight is for the protection of consumers. Not only does regulation allow for fair rating across all providers, it protects the expectation that claims be paid as agreed upon in the contract.

A company’s insolvency cannot void the contract. There may be a variety of reasons a company becomes insolvent.

In these cases, the Division of Insurance steps in to make sure the consumers’ protection continues. As long as the insured has paid the premiums, that policy must be honored.

Insurance Rates Originate within Territories

When it comes to price, there are certain factors that are unchangeable within the regulations. The State of New Jersey last underwent a reassignment of territories in 2007. These territories are largely what determine the base rate for calculating the policy premium, or price.

As a result of the Auto Insurance Cost Reduction Act of 1998, the 27 auto territories were redrawn. This is something that had not been addressed since the 1940s. This action established what is known as the Common Map, although companies were permitted to create their own maps.

Consumers are still required to go by their zip code to determine their premiums.

Other Static Conditions Effect Premium Rates

There are other variables at play in determining automobile insurance premiums that cannot be negotiated. For instance, gender and age play a significant role in the actuarial statistics determining rates.

Points are another tool used in underwriting an auto insurance policy to help determine the premium. The insurance companies assign points with respect to motor vehicle violations, at-fault accidents or license suspensions.

These points differ from those assigned by the New Jersey Motor Vehicle Commission. The goal is to establish a price reflective of a driver’s record of performance behind the wheel. Younger drivers who are newly licensed are automatically assigned three points due to inexperience.

This is strictly to establish eligibility in the voluntary market for auto insurance.

Eligibility, the Voluntary Market and Assigned Risk

New Jersey regulations govern the rates, premiums and eligibility of a driver to purchase coverage in what is termed the voluntary market. There are some insurers willing to place coverage for drivers who have exceeded the threshold of seven eligibility points within the three-year period first preceding an application for insurance.

This can be useful for consumers who would otherwise be directed to purchase their coverage through the New Jersey Personal Automobile Insurance Plan (NJPAIP).

The NJPAIP is assumed under what is called the assigned risk market. This is for those drivers who cannot obtain coverage through the voluntary market. Insurers must be fair in denying, canceling or non-renewing coverage. The rates NJPAIP are set and do not vary regardless of the insurance provider.

The rates also tend to be higher due to higher risk factor. There is a chance of obtaining coverage for less if an insurer in the voluntary market accepts the risk. This is another reason why shopping around to get the best price is a good idea.

Mandatory Coverage Comes with Accommodations When Qualified

In order to drive in the State of New Jersey, drivers are required to carry automobile insurance. As part of the rights and responsibilities, drivers are financially responsible for third party exposure. Among the variety of options available to consumers, New Jersey established the Special Policy Initiative to provide affordable auto insurance coverage.

This is a low-cost plan for those drivers who qualify for Federal Medicaid with hospitalization. It is a medical coverage-only plan, however.

Consumers Have a Right to Know

Insurance providers are required to inform consumers of their coverage options at any point in the process of obtaining insurance. Changes to coverage may occur at any time the consumer decides, not just at the renewal date.

Shoppers should inquire about their basic, standard and additional options for the best possible coverage at the best price.

The Basic Policy

The Basic Plan provides for limited benefits and therefore has a lesser premium. It is intended to meet the minimum requirements under the law. It is best suited for the consumer with few assets or family responsibilities looking to save the most money.

The Standard Policy

There are more options with the Standard Plan including the opportunity to expand protection through additional coverages. It is the most common policy plan selected by New Jersey drivers.

Outline of Coverages

  • Liability – covers third party claims for bodily injury and property damage as well as defense attorney fees in the event of a lawsuit
  • Uninsured and Underinsured Motorist Coverage – pays when there is bodily injury or property damage caused by an uninsured or underinsured driver
  • Physical Damage – pays for damage due to a collision with another vehicle or other object, or for comprehensive damage that is not caused by a collision. This can be from theft, fire, flood or a broken windshield. Any collision with an animal is paid under comprehensive coverage.

Other Ways to Reduce the Rates of Automobile Insurance

Teenage drivers have a few options to offset those three points added to their policy rate structure. To start with, shop around to different providers as this is the area where they have some discretion to reduce the rates. Here are some areas to focus on:

  1. Work at Keeping Those Grades Up – check with the insurer to see if they offer the Good Student Discount for those maintaining at least a 3.0 grade average or higher.
  2. Driver Training – whether in school or through an outside training program, some insurers offer a premium discount for programs that cover both behind-the-wheel and classroom instruction.
  3. Choose a Vehicle Wisely – another aspect of establishing rates are the make, model and year of the car being insured. An older vehicle has lower rates applied than a newer, luxury or high-performance model. Further, safety features on the car may qualify for yet more discounts. Be sure to check with the carrier to learn what is possible.
  4. Select higher deductibles – this applies to any age of driver and represents a higher sacrifice in the event of a claim. Consumers willing to absorb a larger of out-of-pocket cost by paying a higher deductible will see a reduction in the policy rates applied.

A Word to the Wise

The concept of insurance continues to be that safety net in the event of the unforeseen accident. With auto insurance, the strategy is more about anticipating the behavior of the other guy, especially if you are a careful, defensive driver.

This is another reason why the rates for younger, inexperienced drivers tend to be higher. While there remains a learning curve, accidents tend to be more frequent. However, drivers who recognize their insurance coverage for the asset protection it is designed to be make out a lot better in the long run.

The longer a driver maintains a clean driving record over time, the more the rates will reduce accordingly. These are just some of the areas up for discussion and possible negotiation when meeting with insurance providers for quotes.

Remember Your Rights

The Department of Banking and Insurance guarantees certain rights and responsibilities with regard to the purchasing of automobile insurance. There are strict guidelines on when and why a provider may deny coverage. A consumer can never be denied coverage on the basis of gender, ethnicity or race.

Anytime auto insurance coverage is denied, the insurer must provide their reasoning.

Consumers have the right to change or cancel their insurance at any time. This includes shopping for better rates. Just be sure to always have coverage lined up before a short-rate cancellation. Any lapse in coverage comes to bear upon the driver under the law.

Consumers have the right to a timely response from providers whether that is in the pursuit of information, filing claims, making changes to an existing policy or a cancellation of coverage.

Given the changes that have occurred in the market and the regulations governing the fair treatment of both consumers and providers, insurance rates in New Jersey have made dramatic improvements from decades past.

Armed with information and prepared to ask questions, consumers have the chance to reap the benefits of lower rates and coverage specific to their needs.

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