New Jersey Low-Income Car Insurance: The Dollar-a-Day Policy and the Basic Policy

New Jersey offers two low-cost routes for drivers who cannot afford a standard auto policy. The Special Automobile Insurance Policy, usually called the dollar-a-day policy, costs $365 a year, or $360 if paid up front, and is restricted to residents currently enrolled in federal Medicaid with hospitalization. The Basic Policy is open to every New Jersey driver and provides more protection than the SAIP, though far less than a standard policy. Both are legal ways to drive in the state, and both give up protection most drivers would want. The entire decision comes down to understanding precisely what each one leaves out.

Who qualifies for the Special Automobile Insurance Policy

Eligibility rests on a single test. The New Jersey Department of Banking and Insurance limits the SAIP to people currently enrolled in federal Medicaid with hospitalization. If you are not in that program, you cannot buy the policy, however low your income is. If you are, the policy is sold through New Jersey licensed insurance producers.

The department describes the SAIP as an initiative to help make auto insurance available to drivers likely to go uninsured because of limited financial resources. Take that description literally. The program exists so that a driver with almost no money can still be legal on the road, not so that a driver can save money on real coverage.

What the dollar-a-day policy actually pays for

The SAIP covers only a narrow set of medical outcomes:

• Emergency treatment immediately after an accident
• Treatment of serious brain and spinal cord injuries, up to $250,000
• A $10,000 death benefit

The exclusions are where drivers get caught off guard. According to the department, the policy does not cover outpatient treatment such as doctor visits that Medicaid already pays for, damage you may cause to other people or their property, or damage to your own car. The second of those is the one that matters most: the SAIP contains no liability coverage. If you cause a crash, the other driver's repairs and injuries are not covered, and you are personally on the hook for those costs.

The Basic Policy: the other low-cost option

New Jersey's Automobile Insurance Cost Reduction Act requires that a Basic Policy be offered to all drivers, not just Medicaid enrollees. It costs more than the SAIP and less than a standard policy, and it does include some liability protection. As the department describes it, the Basic Policy provides:

• Property damage liability of $5,000 per accident
• No bodily injury liability as standard, although $10,000 for all persons per accident can be added as an option
• Personal injury protection of $15,000 per person, per accident, with up to $250,000 for certain serious injuries
• No uninsured or underinsured motorist coverage
• Collision and comprehensive only as options, and only from some insurers

The $5,000 property damage limit is the figure to dwell on. A moderate collision with a newer vehicle can exceed it with ease, and everything above the limit is your personal responsibility. The department suggests the Basic Policy for people with few family responsibilities and few real assets, and notes that it can work as a transition for younger drivers just starting out in the workforce.

How the Standard Policy differs

A Standard Policy in New Jersey begins well above those numbers. Bodily injury liability starts as low as $35,000 per person and $70,000 per accident and can be purchased up to $250,000 per person and $500,000 per accident. Property damage liability starts as low as $25,000 per accident and can go to $100,000 or more. Uninsured and underinsured motorist coverage is available up to the limits you choose for liability, something the Basic Policy does not offer at all.

If your budget can stretch to a Standard Policy with low limits, that is usually a better trade than a Basic Policy, because it restores the two protections the cheap policies remove: meaningful liability coverage and protection against uninsured drivers.

What driving without insurance costs instead

Auto insurance is mandatory in New Jersey, and the department is blunt about the penalties for driving uninsured: fines, suspension of your driver's license or registration, and even jail time, on top of the financial risk of having no coverage whatsoever.

The department also points to a consequence specific to carrying no liability coverage. Without it, you are responsible for paying for the pain, suffering, and some economic damages such as lost wages that you cause; your insurer will not provide or pay for a lawyer if you are sued; and your assets are at risk, including the possibility of money being taken from your wages if a judgment is entered against you.

If no insurer will write you a policy

Price is one obstacle and availability is a separate one. New Jersey maintains the Personal Automobile Insurance Plan for drivers who cannot find coverage in the ordinary market. The department publishes a way to locate a PAIP producer and a phone line for drivers who need one. If you have been turned down rather than priced out, that is the route to ask about before concluding you have no legal option.

The bottom line

If you are enrolled in federal Medicaid with hospitalization and truly cannot afford anything else, the SAIP makes you legal for $365 a year, but it leaves you personally responsible for any damage you cause and for any damage to your own car. If you are not in that program, or you have assets worth protecting, weigh the Basic Policy against a Standard Policy with the lowest limits an insurer will sell you. The price gap between the two is often smaller than the protection gap, and the Basic Policy's $5,000 property damage limit is easy to exceed in one ordinary crash.

Trying to decide between these options and not sure what the limits mean for you? Lanewise Auto offers plain-English guidance. Tell us what you want help with and we will walk you through it. Nothing to buy, no obligation.