What is Compulsory Insurance?

Compulsory insurance means that there are certain automobile insurance coverages required by law. In New Jersey, for a Standard Auto Policy the required Coverages are: Bodily Injury and Property Damage Liability (sometimes called a Combined Single Limit), Personal Injury Protection, and Uninsured/Underinsured Motorists coverage. For a Basic Policy, the only required coverages are Property Damage Liability and Personal Injury Protection coverage.


So I need Personal Injury Protection coverage even if I'm covered through my health plan at work?

Yes, but in many cases, you can choose to have your health provider provide primary Personal Injury Protection coverage in return for a reduced premium.


What are optional coverages?

Optional coverages are those coverages offered by an insurance company that are not compulsory. The most common of these coverages are Comprehensive (sometimes called "Other Than Collision") and Collision coverage.

Speaking of Comprehensive and Collision coverage, how come my Comprehensive and Collision premium charges don't detrease as my car gets older? The car is worth less each year, isn't it?

Yes, it's true that your car is usually going to be worth less with each passing year. However, keep in mind the actual cash value of the car is paid by the insurance company only on "total'i losses. This is typically after a severe accident or the total theft of a vehicle, which is a very small amount of the total number of comprehensive and collision claims.
Most of Comprehensive and Collision claims are for partial losses, where the insurer reimburses you or pays the body shop directly to perform repairs on the vehicle. The cost to perform these repairs increases every year. Remember, a repair shop's hourly labor rate goes up pretty much every year. Since this affects the vast majority of comprehensive and collision claims, the premium charges for these coverages do not automatically decrease.


I recently had a car accident. Will my car insurance bill automatically go up?

The answer to this question depends upon the company, and depends upon whether the accident was at-fault or not.
Some insurers will increase your auto insurance premium after a certain number of not-at-fault accidents over a specified dollar amount. The insurers do this through a rating mechanism called "Tier Rating". Usually you will not be rated in a higher tier simply because of one not-at-fault accident. A typical tier rating rule might read something like: "two or more not-at-fault accidents where each accident caused a claim payment in excess of $500" rate the vehicle in the sub-standard tier.
Yiost, but not all, insurers will rate a driver in a higher rated tier after one at-fault accident.

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