TRENTON – Lawmakers this week could vote to increase the minimum amount of auto insurance coverage that drivers must have, probably adding $120 or more to the yearly premiums of 1.1 million drivers.
The required minimum for liability coverage – $15,000 for a crash in which one person is injured and $30,000 for injuries of two or more people – hasn’t been raised since 1972 and doesn’t cover the costs resulting from the average accident in which an insurance claim is filed.
But the 21% of drivers with that minimum insurance generally carry it only because it’s required and cannot afford more. And so even though the bill moving the Legislature was amended to remove some provisions that could have pushed up the average bill more than $300, the idea still has many critics.
James Lynch, president of the New Jersey Association for Justice, a group of personal injury and civil law attorneys, said he knows no one likes paying for insurance but says after people are involved in a crash, they wish they’d paid for extra coverage.
“Someone that doesn’t have a lot of money, maybe that extra $10,000 in recovery would be extraordinarily meaningful to them – extraordinarily,” Lynch said.
The bill requires the current $15,000/$30,000 worth of liability coverage to increase to $25,000/$50,000 starting in January 2023. A second step to a $35,000/$70,000 minimum would take effect in 2026. Also, the coverage for property damage would increase to a minimum of $25,000.
More uninsured drivers?
Gary LaSpisa, vice president of the Insurance Council of New Jersey, said the second increase in 2026 should be removed from the bill and revisited later, though he was glad other provisions of the plan got removed – going to $50,000/$100,000 as a minimum and raising the minimum personal injury protection, or PIP, coverage.
“I still think we will see a spike in the uninsured motorist rate because some people simply won’t be able to bear even the $130 we’re talking about,” LaSpisa said.
Allison Cooper, vice president of government affairs for the American Property Casualty Insurance Association, warned lawmakers not to approve the increase when inflation is at a 40-year high.
“The cost of everything is going up, and we are concerned that those who are on a fixed income and are forced to choose between paying for basic necessities such as gas, rent, groceries, etc., they may very well opt to forgo insurance altogether,” Cooper said.
That, in turn, could raise insurance rates for everyone, through what is paid to account for uninsured drivers. New Jersey has the nation’s lowest rate of uninsured drivers, 3.1%.
Coverage won’t cover average crash
The bill was endorsed Thursday by the Assembly Financial Institutions and Insurance Committee. A version of the bill with provisions removed by the Assembly was endorsed earlier last week by a Senate committee, and the Senate budget committee is due to take up the bill Monday – including the changes made by the Assembly, most likely.
Assemblyman Raj Mukherji, D-Hudson, said a change is needed because the minimum liability coverage doesn’t even cover the $18,000 average costs from a crash, let alone the outer limits of exposure.
“When someone suffers losses or injuries exceeding that amount, they’re not even made whole,” Mukherji said.
Assemblyman Joe Danielsen, D-Somerset, said the bill takes options away from residents who can afford it least and will choose to go without car insurance, eat less or not drive at all.
“And affordability, not only just with insurance and transportation but just living in New Jersey, it’s painful. It’s tiring. It’s exhaustive,” Danielsen said.
Danielsen voted to release the bill from the Assembly committee because otherwise, it would have deadlocked 6-6 and not be in position for a final vote. But he indicated he would oppose it in a floor vote in the full Assembly.
‘The ones that could least afford it’
Assemblyman John McKeon, D-Essex, voted for it and walked through the rationale for why it’s needed, calling the $15,000 in coverage “a paucity of money.” But McKeon also said he’s worried about the financial impact on drivers.
“The fact of the matter is with probably little exception, the 1 million insureds, the 20%, that have minimum coverage, and the ones that could least afford it,” McKeon said. “And this is another $120 out of their pockets. And that’s why I have significant concerns.”
The 2026 increase will impose a second rate hike on drivers, but the amount isn’t known as the insurance coverage that will be the required minimum isn’t currently sold and therefore doesn’t have a price yet.
Maura Collinsgru, director of policy and advocacy for New Jersey Citizen Action, said low-income drivers already pay higher rates not because of their personal driving history but because rates can be set using things such as credit scores, occupation and education.
“You are setting the clock for inflicting further harm on this very population come Jan. 1,” Collinsgru said.
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