Why NJ Auto Insurance Rates Are So High

Many factors go into determining an auto insurance premium — some you can influence, but others you can’t.

Auto Insurance Pricing Factors

Let’s start with those that are generally beyond your control:

1. New Jersey: “We’re a densely populated state with many urban areas and commuters that drive quite a distance. That means more cars on the road in all types of weather and, consequently, higher accident rates,” explained Scott Stanford, president and owner of Stanford Agency, an independent insurance agency in Tinton Falls. He added that “medical costs are high, as are car repair costs. Auto theft and vandalism rates are contributing factors. And we tend to be a litigious state in addition to having a significant number of uninsured drivers on the roads. The number of uninsured drivers has reduced dramatically over the past several years, but we still rank higher in this category than many other states.”
2. Where you live in New Jersey: Your county of residence may affect your premium. “Some insurance companies have much better loss experience and consequently better rates,” Stanford said. “But, of course, that can change as loss experience changes.”
3. Age: Teenagers and senior citizens sometimes pay higher than average rates for their car insurance. Teen drivers are more likely to get into accidents and more likely to be in a fatal accident. On the other hand, age-related vision, hearing, cognitive functioning, and motor skill deficits along with greater use of prescription medicines are assumed to affect older adults’ driving abilities.
4. Gender: Statistically, women are less likely than the average male driver to get into a car accident or commit moving violations like speeding and driving under the influence (DUI), and more likely to drive fewer miles.
5. Driving distance and frequency: The more time you must spend behind the wheel such as commuting to work regardless of weather conditions, the higher your risk. Where you park your car can affect cost too.
6. Insurance coverage lapses: A lapse (gap) in insurance coverage (any period when you don’t have car insurance) can land you in a higher risk category especially if you are ticketed for driving without it. Drivers without a lapse are statistically less likely to get into a car accident. Forgetting to pay a premium on time is a common reason for coverage gaps.
7. Your accident and insurance claim history: Good drivers pay less for insurance. If you have violations on your driving record, or if you have filed auto insurance claims in the past, you will be considered a higher risk. This will be reflected in your premium.

NJ Auto Insurance Premiums – Pricing Factors You Can Influence

Now for the better news. The following are factors affecting car insurance premiums that you can improve or change.

1. Your future driving record and insurance coverage: While you can’t change the past, you can clean up your record going forward by driving and maintaining your vehicle in a safe and legal manner. You can also contest a questionable ticket and possibly get penalties reduced or dismissed. By taking a NJ state-approved defensive driving course, you may be able to erase points for minor infractions like failure to yield or driving moderately above the speed limit.
2. Your “insurance score”: Your credit score can have an impact on how much you pay for insurance. Studies have shown that a poor credit score, one of the factors in developing your overall insurance financial score, coincides with higher claim frequency and severity.
3. Your vehicle: Insurers look for many things when evaluating your car for insurance: the vehicle’s value, theft risk, and safety rating. Typically the more expensive your vehicle, the more it will cost to repair or replace in the event of an incident. Similarly, certain makes and models are stolen more frequently and therefore deemed higher risk vehicles to insure. And the safety features included in a vehicle such as crash avoidance and mitigation capabilities can result in a lower insurance premium than those vehicles not so equipped. How well your vehicle protects its occupants in the event of an accident (crash worthiness) can work for or against you.
4. Coverage levels and deductibles: The minimum mandatory coverage required in NJ is $15,000 of bodily injury liability per person, $30,000 of bodily injury liability per accident, $5,000 of property damage liability per accident, and $15,000 of personal injury protection (PIP) per person or accident. Higher limits can increase your premium while higher deductibles can help to reduce it. While PIP is mandatory, in many cases you can choose to have your personal health insurance respond first to auto-related injuries. In New Jersey, choosing to limit the types of injuries you can sue for (tort threshold) can also further reduce your insurance premium.

“Having sufficient liability insurance coverage to properly protect your assets and limit your out-of-pocket expenses in the event of an accident is vital,” said Stanford. “But your personal and family circumstances can change over time, and you should consider whether you need more liability coverage or perhaps may no longer need collision coverage as your vehicles age.”

Auto Insurance: Shop Around

Stanford advises consulting with your insurance agent at least every couple of years. “Each insurance company weighs your risk differently in calculating your premium, and that weighting can sometimes change from year to year.”

Independent insurance agents, like Stanford, work with multiple insurers (8 or 9 auto insurers for his agency) which gives them insight into variations in rate-setting criteria and helps simplify the insurance shopping process, e.g., applicants need to fill out only one form. His agency also works with clients to determine their needs and liability exposure (earnings and assets they need to protect) to craft a policy that adequately addresses their individual needs.