Legal Guide

How to Buy Auto Insurance

by: Steven Blader

Recent changes in automobile insurance laws have created a great deal of confusion for individuals buying auto insurance. Coverage selections may be influenced by the buyer's age, driving history, current financial status and medical insurance, the year and condition of the buyer's automobile, the annual mileage, workers' compensation laws, and personal preference.

Q. How should I choose an automobile insurance company?

A. Some auto insurance companies in New Jersey reduce their costs of doing business by becoming your adversary or opponent if you present a personal injury claim. You should deal with reputable insurance companies and also shop based on price of coverage for your particular needs, but make sure when you compare the price offered by different companies that you are in fact comparing identical coverage.

Q. Verbal threshold or no threshold: which is best?

A. "Verbal Threshold" means that you cannot sue for your pain, suffering and disability resulting from a motor accident unless you have a permanent injury. You automatically receive verbal threshold coverage unless you reject the verbal threshold on your insurance selection form and select the "No Threshold" option prior to making payment on the insurance coverage. I recommend that you check the cost of obtaining a "no threshold" policy (usually about $300 per vehicle). Then you can decide if you want to receive compensation regardless of whether you have a permanent injury.

Q. How much uninsured/underinsured motorist coverage should I buy?

A. Uninsured/underinsured motorist coverage provides insurance coverage for your injuries in the event that the person causing the accident has inadequate or no insurance. You can only purchase uninsured/underinsured insurance up to the limit of your own liability insurance. However, I often find that people have substantially less uninsured/underinsured motorist coverage than their liability insurance coverage because there is little financial incentive for insurance companies to provide the coverage. You should definitely increase your uninsured/underinsured coverage to equal your liability coverage, because it can be critical to you and your family's financial survival if you are involved in a serious motor vehicle accident. This insurance is inexpensive and provides a financial protection in case of prolonged recovery from an accident.

Q. Should I save money on automobile insurance by selecting the "basic policy"?

A. No. The "basic policy" reduces insurance premiums by limiting insurance coverage. The "basic policy" provides no liability insurance, $15,000 (rather than $250,000) of medical coverage, and no legal counsel if you are sued. I strongly urge that you do not select the "basic policy." Remember, too, if you are at fault in an accident you may be subject to a judgment for twenty (20) years. You want insurance to pay the judgment on settlement because any judgment that is the result of a motor vehicle accident would cause you to lose your driver's license and the right to own a vehicle until the judgment is paid or until you file a bankruptcy claim.

Q. Should I select my health insurance company through my employment to pay for my medical bills related to an automobile accident?

A. Your automobile insurance company gives you an option to reduce your insurance premium by selecting your health insurance carrier through your employment as providing primary coverage for the injuries sustained in a motor vehicle accident. You will save about $35 per year by selecting this option, but the trade-off makes this option a bad choice. Your health insurance through your employment may have a lifetime cap of $1,000,000 (one million dollars) which could be substantially eroded by the medical expenses related to a serious motor vehicle accident. Your health insurance policy may also limit your access to in-network physicians, while such restrictions are not present in medical insurance provided by your motor vehicle policy.

If you decide to select your health insurance to pay for injuries related to a motor vehicle accident, you should first contact the health insurance company to make sure that they provide coverage for injuries related to motor vehicle accidents. If you select your health insurer to pay for injuries related to a motor vehicle accident, and it is determined that the health insurer does not provide such coverage, your motor vehicle insurer will end up paying your medical bills, but you will be liable to pay a $2,500 medical deductible for each accident.

Q. How can I evaluate the various insurance options?

A. You should evaluate your automobile insurance options with your agent to determine your actual costs savings for each option. Don't accept a claim that you will save a certain percentage of your premium by selecting an insurance coverage option. Ask what the actual dollar savings are. The premium savings that I have provided are estimates, and your premium savings will vary depending upon where you live and your driving record. The most important decision that you can make is to become involved in the process to select your auto insurance coverage rather than allow a company or an agent to arbitrarily define your automobile insurance coverage needs.

Szaferman, Lakind, Blumstein, & Blader, P.C.
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