Is New Jersey a No-Fault State?

Last Updated on November 5, 2022

New Jersey is a no-fault state. Along with roughly a dozen other states, New Jersey uses a no-fault system, which means fault is not assigned after a car accident.

Because New Jersey is a no-fault state, accidents work differently in New Jersey than in other states. Insurers process claims differently, and you have different responsibilities after an accident.

However, New Jersey allows drivers to opt out of the no-fault insurance system. You can reject no-fault insurance coverage and buy at-fault insurance in New Jersey.

Keep reading to find out everything you need to know about New Jersey’s no-fault insurance system and what it means for you.

Table of Contents:

How New Jersey’s No-Fault Car Insurance Works

New Jersey uses a no-fault car insurance system, which means fault is not considered when covering medical bills after an accident.

Most states use a fault-based insurance system, also known as a tort insurance system. After an accident, investigators determine who was at fault for the accident. They might determine one driver was 100% at fault, for example. Or, they could split fault 60/40 or 50/50.

New Jersey is one of 12 states using a no-fault insurance system, along with Florida, Hawaii, Kansas, Kentucky, Massachusetts, Michigan, Minnesota, New York, North Dakota, Pennsylvania, and Utah.

However, New Jersey’s no-fault insurance system is unique because you can opt-out of it. You can reject personal injury protection (PIP) coverage and buy a full tort insurance system. Effectively, this gives New Jersey drivers the option of participating in a no-fault or fault-based insurance system.

Here are the basics of New Jersey’s no-fault insurance system:

  • New Jersey uses a no-fault insurance system, which means insurers don’t consider fault when covering medical costs after an accident
  • New Jersey, like other no-fault states, still uses fault to cover property damage; investigators determine which vehicle was more at fault for the accident, and the at-fault driver must cover the cost of repairing or replacing the damaged property
  • You can opt-out of New Jersey’s no-fault insurance by rejecting personal injury protection (PIP) and choosing full tort insurance, which gives you an unlimited right to sue another driver after an accident
  • Your insurer always covers injuries from car accidents, regardless of who is at fault for an accident
  • Even if you are a passenger in another person’s vehicle, your own insurance company must cover your medical bills after an accident
  • You receive medical coverage and certain other coverages through your personal injury protection (PIP), also known as no-fault coverage; via PIP coverage, insurers reimburse you for medical expenses, lost income, rehabilitation costs, and other treatment expenses after an accident

Full Tort Versus Limited Tort in New Jersey

When buying car insurance in New Jersey, you can choose a full tort or limited tort plan:

  • Limited tort reduces your right to sue an at-fault driver for pain and suffering and other non-economic damages (unless the injury is permanent or caused disfigurement)
  • Full tort has no restrictions on your right to sue an at-fault driver after an accident

If you choose a full tort insurance policy, you are opting out of New Jersey’s no-fault insurance system. If you choose a limited tort insurance policy, which is standard in New Jersey, then you are participating in the no-fault insurance system. You still have a right to sue, although you can only sue after certain significant qualifying injuries.

Your Right to Sue After an Accident

After an accident, you could have extensive injuries. Your own insurer covers medical bills linked to these injuries up to the limits of your policy. However, you may choose to sue the other driver for additional damages.

New Jersey, like other no-fault states, gives you a limited right to sue other drivers.

Unlike other no-fault states, however, New Jersey gives you the option to opt out of the no-fault system. Depending on which option you selected for your car insurance, you could have a limited right to sue – or a full right to sue.

A standard auto insurance policy in New Jersey uses a no-fault insurance system, where you have a limited right to sue other drivers after an accident.

  • If you have a standard, no-fault auto insurance policy in New Jersey, then you can only sue another driver if you suffer dismemberment, significant disfigurement, significant scarring, displaced fractures, loss of a fetus, or a permanent injury after an accident
  • If you opted out of New Jersey’s no-fault insurance system and chose a full tort policy, then you have no limitations on your right to sue, and you can sue another driver for any liable damages

How New Jersey’s No-Fault PIP Coverage Works

New Jersey requires drivers to carry personal injury protection (PIP) coverage on a standard policy. If you do not opt-out of New Jersey’s no-fault insurance system, then your policy includes a certain amount of PIP coverage.

New Jersey requires a minimum of $15,000 of PIP coverage per person, per accident by law. Some drivers meet these minimum limits, while others exceed them.

A standard PIP policy may cover all of the following after an accident, regardless of who was at fault:

  • Medical bills, including the cost of treating your injuries after an accident
  • Income continuation, which covers any lost wages after an accident (say, if you can’t work due to injury)
  • Essential services, including payment for essential services you would normally do yourself but are unable to do because of your injury
  • Death and funeral expenses, including compensation to family members or estates and coverage for reasonable funeral expenses

Because of these coverages, your insurer could provide you with thousands of dollars in compensation after an accident, regardless of who was at fault for the accident. Your insurer covers all of the above items up to the limits of your insurance policy.

How to Choose a Health Care Primary for PIP Coverage in New Jersey

When comparing car insurance in New Jersey, you also choose your Health Care Primary for your personal injury protection (PIP) coverage.

If you have health insurance, then you may want to select your health insurance provider as your Health Care Primary for PIP coverage. This can reduce your PIP premiums and minimize headaches after an accident.

Some health insurance companies are not eligible for selection as a Health Care Primary for PIP coverage. If you’re with New Jersey Family Care Plans, Medicare, or Medicaid, for example, you may be unable to select your healthcare provider as your Health Care Primary for PIP coverage.

If you’re with other health insurance companies, however, then you can reduce PIP premiums by up to 25% by using your health insurance company as your Health Care Primary for PIP coverage in New Jersey.

Pros and Cons of New Jersey’s No-Fault Insurance System

New Jersey’s no-fault insurance system comes with various pros and cons. Here are some of the advantages and disadvantages of New Jersey’s no-fault insurance system:

Pros

Advantages of New Jersey’s no-fault insurance system include:

Faster Payouts from Insurers: Your insurer always pays for your medical expenses after an accident, which means you don’t need to wait for a payout from an insurer. In states with fault-based insurance systems, you may need to wait for insurers to determine fault before receiving a payout – even though your medical bills are due immediately.

You Can Opt Out: You are not required to participate in New Jersey’s no-fault insurance system. You can reject personal injury protection (PIP) coverage and eliminate all limitations on your right to sue, effectively opting out of the no-fault insurance system. In other words, drivers in New Jersey can participate in the insurance system they like.

Coverage for More than Just Medical Expenses: PIP provides better coverage for medical expenses after an accident than the typical coverage in at-fault states. You can drive in New Jersey with better peace of mind knowing you have coverage for medical bills, lost income, and other expenses after an accident. These coverages aren’t guaranteed in at-fault states with a tort insurance system.

Property Damage Still Falls Under Fault-Based Insurance: If another driver collides with you and causes extensive damage to your vehicle, then that driver’s insurance will cover the cost of repairing your vehicle to pre-loss condition – even in no-fault states like New Jersey. New Jersey’s no-fault insurance model is for injuries and medical costs after an accident – not damage to your vehicle.

Cons

Disadvantages of New Jersey’s no-fault insurance system include:

Higher Premiums: New Jersey has higher-than-average insurance premiums compared to the rest of the United States. In fact, drivers in New Jersey pay hundreds of dollars more per year, on average, than drivers in the rest of the country. The average driver in the United States pays around $1,450 per year for full coverage car insurance, while the average driver in New Jersey pays around $1,954 per year. Many factors impact car insurance premiums, but states with no-fault insurance systems tend to have higher premiums than states with fault-based insurance systems.

Final Word

New Jersey is a no-fault state, which means your insurer always covers your medical bills after an accident, regardless of who was at fault.

However, drivers can opt out of New Jersey’s no-fault insurance system and retain the full right to sue other drivers.

To learn more about New Jersey’s no-fault insurance system and the coverages available, compare New Jersey car insurance quotes online today.

James Shaffer
James Shaffer James Shaffer is a writer for InsurancePanda.com and a well-seasoned auto insurance industry veteran. He has a deep knowledge of insurance rules and regulations and is passionate about helping drivers save money on auto insurance. He is responsible for researching and writing about anything auto insurance-related. He holds a bachelor's degree from Bentley University and his work has been quoted by NBC News, CNN, and The Washington Post.
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