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New Jersey Basic Automobile Insurance Policy

Driving without automobile insurance is against the law in New Jersey. As such, uninsured drivers can face large fines, and/or imprisonment.

New Jersey Basic Automobile Insurance Policy

In an attempt to reduce the number of uninsured drivers, the state of New Jersey implemented the Automobile Insurance Cost Reduction Act of 1998. One of the outcomes of this act was to provide drivers with a bare bones, inexpensive “basic” auto insurance policy for individuals who could not bear the cost of purchasing the standard New Jersey automobile policy. Read also: Purchasing Auto Insurance in New Jersey.

Coverages Offered by New Jersey's Basic Auto Policy

The basic automobile policy in essence provides coverage for the driver and individuals insured under the basic auto policy. It does not provide liability coverage for injured third parties unless the insured elects to purchase the coverage. Coverages and limits are as follows:

  • Bodily Injury Liability (covers third parties for bodily injury as a result of an accident caused by the insured): Not covered unless the insured elects to purchase a $10,000 per person/accident limit. Third party bodily injury liability coverage is an optional coverage.
  • Property Damage Liability (covers third parties for property damage caused by the insured): $5,000 per accident.
  • Personal Injury Protection (protects the driver and individuals covered under the policy for injuries sustained in an accident: $15,000 per person/accident. Up to $250,000 for severe injuries.
  • Uninsured/Underinsured Motorist Coverage (covers property damage caused by a motorist that is uninsured or had not purchase high enough limits to cover the property damage caused): Optional.
  • Physical Damage Coverage (provides first party reimbursement for damage to the insured vehicle): Optional.

Basic Automobile Policy Benefits to the Insured

Purchasing the basic automobile policy allows a driver to buy the bare minimum of insurance and still comply with New Jersey insurance laws. For the minimal cost of purchasing a scaled down auto insurance policy, drivers can avoid breaking the law and subjecting themselves to fines, license suspension and/or imprisonment. Read also: Vehicle Claims and Auto Insurance Estimates.

This inexpensive auto policy was intended for individuals who might otherwise have opted to drive without insurance.

Benefits to the General Driving Public

The benefits to the driving public seem to be minimal. Automobile insurance is a form of proving financial responsibility. While the insured is financially responsible for himself and individuals insured under his policy, the general public is not so adequately covered.

In the event a driver with a basic policy causes an accident that results in severe third party bodily injuries, the general public will have to look to their own insurance policy for reimbursement as the basic policy does not provide adequate insurance (if any) to third parties for bodily injury liability. Read also: Extended Auto Warranty Companies.

The Importance of Purchasing Increased Limits

Because of the lack of third party bodily injury liability coverage afforded by the basic policy, it is recommended that drivers who opt to purchase New Jersey's standard automobile policy increase their policy limits. Although according to an October, 2002 bulletin from the New Jersey Department of Banking and Insurance less than .22% of all polices in force are basic insurance policies, the general public should take steps to ensure that they are adequately covered in the event they are unfortunate enough to have an accident with a driver who happens to be one of the .22% with a basic auto insurance policy.


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