Should New Jersey Driver’s Lower their Car Insurance PIP Limits?

Saving money upfront on lower PIP limits may cost you more in the future.

PIP. Threshold. No-Fault.  New Jersey drivers hear these terms, but may not fully understand what they mean.  New Jersey Automobile coverage is a no-fault system for medical benefits. That means that in the vast majority of situations, your OWN policy pays for medical treatment and care if you are injured in a car accident. This is called “Personal Injury Protection,” or PIP.  The “default” coverage limit for PIP is $250,000.00.  Your own policy pays for medical treatment and care up to that limit. There is a State of New Jersey fund that pays for medical bills over that amount. New Jersey law states that you if you sue the other driver for your injuries, you cannot even mention the medical bills (assuming you meet the lawsuit threshold-but that is a topic for another day).

However, New Jersey offers the option to choose a lower PIP benefit limit.  You can choose $15,000, $50,000, $75,000, or $150,000; in exchange for a lower premium.  You may be thinking that it is worth it to lower your PIP limit to save money on your premium.

We advise that you DO NOT lower your PIP limit.

The New Jersey no-fault system was designed to save money and court resources by making each driver’s own policy pay for medical treatment and care.  In Haines v. Taft, decided by the New Jersey Supreme court on March 26, 2019, the Court was presented with a situation where the Plaintiffs were involved in a car accident.  They had chosen the lowest $15,000 PIP limit.  Each Plaintiff incurred medical bills over that amount. The no-fault system paid up to the $15,000.00 limit.  The Plaintiffs then sued the other drivers to recover the excess bills.

The Court ruled that the no-fault system prohibition on recovering for medical bills applied up to the $250,000 “default” PIP amount included in State law-even if you chose a lower limit for your policy.  The court determined it would be “absurd” to allow someone to choose the lower limit, and save money, and then be able to go to court to recover the difference; while someone who had the higher PIP limit could not.

In addition, the court determined that medical bills, since they are considered a first-party benefit (meaning paid by your own carrier) were not “economic losses” which could be recovered in court.  The final result appears to be that these individuals will be personally responsible for any medical bills in excess of the $15,000 they selected in their auto policies. There were two injured plaintiffs, one of whom had $28,000 in excess bills and one of whom had $10,000 in excess bills.  Each of these injured individuals will now need to pay their own medical bills.

There are other options you can choose to try to save money.  You can select a higher deductible.  The “default” deductible is $250, but you can choose a higher amount.  If your health insurer allows it, you can choose your health insurance carrier to be your primary provider for medical treatment benefits.  Automobile insurance premiums may seem expensive, but out-of-pocket medical bills may be more costly.

Written by Larry Kroll, Attorney At Law, March 26, 2019