Chapter 5 Summary
This chapter covers NJ-specific casualty insurance regulations, including auto insurance requirements, workers compensation rules, deregulated insurance markets, cancellation procedures, surplus lines, and certificate requirements. Use this recap for quick exam review!
NJ Auto Insurance
NJ Mandatory Auto Limits
$15K/$30K
Bodily Injury Liability
$5,000
Property Damage Liability
$15K/$30K
Uninsured Motorist
$15,000
PIP (min) per person
$250,000
PIP (max) per person
Personal Injury Protection (PIP)
NJ is a no-fault state - PIP pays regardless of who caused the accident.
PIP Covers:
- + Medical expenses
- + Income continuation
- + Essential services
- + Death benefits
- + Funeral expenses
Coordination of Benefits:
- + Health insurance primary option
- + Medicare/Medicaid primary option
- + Can reduce PIP premium by 15-25%
Lawsuit Threshold Options
Limitation on Lawsuit (Verbal)
Can only sue for pain & suffering if injury meets threshold: death, dismemberment, significant disfigurement, displaced fracture, loss of fetus, permanent injury
Lower premium
No Limitation (Zero Threshold)
Can sue for any injury, regardless of severity
Higher premium
PAIP (Personal Auto Insurance Plan)
For drivers who can't get coverage in the standard market (high-risk). All auto insurers must participate in PAIP based on market share.
NJ Workers Compensation
NJ Requirements
- + Mandatory coverage for all employers with employees in NJ
- + Exclusive remedy - employees cannot sue employer for workplace injuries (with limited exceptions)
- + Employers can self-insure with Commissioner approval
Benefits Covered
- + Medical treatment (no dollar limit)
- + Temporary disability (70% of wages)
- + Permanent partial disability
- + Permanent total disability
- + Death benefits to dependents
NOT Covered
- + Self-inflicted injuries
- + Injuries while intoxicated
- + Willful misconduct
- + Injuries during horseplay
- + Injuries going to/from work (generally)
Second Injury Fund
Encourages hiring workers with prior disabilities. When a second injury combines with a pre-existing condition to cause greater disability, the fund pays the difference so employers aren't penalized for hiring previously injured workers.
Deregulated Lines of Insurance
What is Deregulation?
Certain commercial insurance lines in NJ are deregulated - meaning insurers don't need prior approval for rates or forms from the Commissioner. Rates must still not be excessive, inadequate, or unfairly discriminatory.
Deregulated Commercial Lines
Still Regulated (Prior Approval Required)
- + Personal Auto
- + Homeowners
- + Workers Compensation
- + Medical Malpractice
- + Title Insurance
- + Medicare Supplement
Cancellation and Nonrenewal
The 60-Day Rule (Commercial)
Under 60 Days
Can cancel for ANY reason
Over 60 Days
Need VALID reason (13 specific reasons)
13 Valid Reasons for Cancellation (After 60 Days)
Notice Requirements
30-120 Days
Standard cancellation/nonrenewal
10 Days
Commercial nonpayment
15/20 Days
Auto (15 nonpay, 20 other)
Auto Insurance Cancellation (4 Reasons Only)
Block Nonrenewal Rules
- + Insurers cannot drop entire lines/classes without Commissioner approval
- + Must file plan 30 days before any notice
- + Minimum 60 days notice to policyholders
- + Can be extended up to 3 years if market impact
Surplus Lines Insurance
What is Surplus Lines?
Insurance placed with non-admitted carriers (not licensed in NJ) for risks that can't be placed in the standard market. Also called "excess and surplus" or "nonadmitted" insurance.
Diligent Effort Requirement
Before placing with surplus lines, producer must show diligent effort to place in admitted market:
3 Declinations
Minimum required from admitted insurers
Exportable List
Certain risks are pre-approved as "hard to place" - no diligent effort needed. Commissioner maintains this list.
Surplus Lines Tax
Producer must collect and remit tax on surplus lines premiums to the state.
Key Warning
Surplus lines policies are NOT covered by NJ Guaranty Fund. If the insurer becomes insolvent, policyholders have no state protection. Producer must inform insured of this in writing.
Certificates of Insurance
Master Policies
A single policy covering multiple insureds (e.g., all vehicles under a dealer's policy, all members of an association).
- + Each covered party receives a certificate (not a policy)
- + Certificate proves coverage exists but is NOT the contract
NJ Certificate Requirements
20 Days
Delivery to policyholder
8 Point
Minimum font size
4 Required Certificate Items
Quick Reference: Key Numbers
$15K/$30K/$5K
NJ min auto liability
$15K-$250K
PIP range (per person)
60 Days
Commercial cancellation threshold
30-120 Days
Standard notice window
10 Days
Commercial nonpayment notice
3
Declinations for surplus lines
20 Days
Certificate delivery
3 Years
Max block action extension
15/20 Days
Auto cancel notice
13
Commercial cancel reasons
4
Auto cancel reasons
8 pt
Certificate min font
Ready to Test Your Knowledge?
Use flashcards and quizzes to reinforce what you've learned in Chapter 5.