On the New Jersey Property & Casualty exam, the personal automobile policy is the single most-tested state topic because New Jersey runs a no-fault / PIP system and forces drivers to make two unusual choices: which policy type to buy (Standard or Basic) and which lawsuit threshold to elect. This guide reviews the national personal auto policy (PAP) structure briefly, then puts the New Jersey overlay front and center—because that overlay is where the exam points are.

The national base: PAP Parts A–F

Everywhere in the country a personal auto policy is built from the same lettered parts. Know them as your foundation, then layer New Jersey on top:

• Part A – Liability: pays bodily injury (BI) and property damage (PD) you are legally responsible for.
• Part B – Medical Payments: small first-party medical coverage (in New Jersey this role is largely filled by PIP).
• Part C – Uninsured/Underinsured Motorists (UM/UIM): pays your injuries when the at-fault driver has no or too little coverage.
• Part D – Coverage for Damage to Your Auto: collision and other-than-collision (comprehensive) physical damage, each with a deductible.
• Part E – Duties After an Accident or Loss.
• Part F – General Provisions (territory, cancellation, etc.).

When a generic PAP answer conflicts with a New Jersey rule, apply the New Jersey rule.

New Jersey is a no-fault / PIP state

New Jersey auto insurance is a no-fault system: after a covered crash, your own insurer pays your medical and economic losses through Personal Injury Protection (PIP) regardless of who caused the accident. The goal is to keep routine injury claims out of court.

• PIP pays medical expenses, and (on the Standard policy) lost wages, essential services, and a death benefit, regardless of fault.
• On the Standard Policy, the PIP medical minimum is commonly cited at $15,000 per person/per accident, with up to $250,000 available for permanent or significant injuries (e.g., catastrophic/brain injuries)—verify current figures.
• Because care is paid no matter who was at fault, New Jersey limits the right to sue for pain and suffering through the lawsuit-threshold choice described below.

Remember the boundary: PIP pays your injuries/economic loss, not your vehicle damage (that's Part D) and not your liability to others (that's Part A).

The two New Jersey choices (the heart of the exam)

Choice 1 — Standard Policy vs. Basic Policy

New Jersey drivers pick between two very different policy types:

• Standard Policy – the full-featured policy most drivers buy. It carries real liability limits, full PIP, and access to UM/UIM and physical damage. Compulsory minimum liability for the Standard Policy is commonly cited at 25/50/25—verify, as New Jersey has scheduled increases (e.g., toward 35/70/25).
• Basic Policy – a stripped-down, low-cost option for drivers who want minimal protection. Commonly cited Basic limits: $15,000 PIP, $5,000 property damage, no required bodily-injury liability (a low optional $10,000 BI is available). The Basic Policy carries no UM/UIM and is generally considered inadequate, but the exam expects you to know it exists.

Choice 2 — The lawsuit-threshold election

Independently, the driver elects how much right to sue they keep:

• Limitation on Lawsuit ("verbal threshold") – the lower-premium option. You may sue an at-fault driver for noneconomic damages (pain and suffering) only if your injury meets a defined serious category (such as death, dismemberment, significant disfigurement, displaced fracture, permanent injury, or loss of a fetus).
• No Limitation on Lawsuit ("zero threshold") – the higher-premium option. You keep the full right to sue for pain and suffering for any auto injury.

The exam loves to combine these: a driver chooses a policy type and a threshold. The verbal threshold = cheaper, restricted lawsuits; the zero threshold = costlier, unrestricted lawsuits.

UM/UIM, physical damage, and the residual market

• Uninsured Motorists (UM) applies when the at-fault driver had no coverage or was a hit-and-run; Underinsured (UIM) applies when the at-fault driver was insured but carried limits too low to cover your damages. UM/UIM is part of the Standard policy and not available on Basic.
• Physical damage follows the national model: collision for impacts/overturns and other-than-collision (comprehensive) for fire, theft, vandalism, glass, hail, flood, and animal strikes—each subject to a deductible and paid at actual cash value (ACV). A classic trap: hitting an animal is other-than-collision, not collision.
• Drivers rejected by the standard market obtain coverage through New Jersey's assigned-risk / personal automobile insurance plan, ensuring everyone can meet the compulsory-insurance requirement.

Cancellation and nonrenewal protections

New Jersey limits an insurer's ability to drop a personal auto policy:

• During an initial review window after a new policy starts, the insurer has broader latitude to cancel for underwriting reasons.
• After that window, mid-term cancellation is generally allowed only for limited reasons—primarily nonpayment of premium, license/registration suspension or revocation, or fraud/material misrepresentation.
• Advance written notice is always required, with a shorter window for nonpayment and a longer window for other reasons and for nonrenewal, so the insured can shop for replacement coverage. Confirm the exact day-counts for your exam, but the concept—notice is mandatory—is the testable point.

Key New Jersey numbers to memorize

Common exam traps

• Treating New Jersey as a pure tort/at-fault state. It is no-fault / PIP with a lawsuit-threshold choice.
• Believing PIP repairs your car. PIP pays injuries/economic loss, not vehicle damage.
• Confusing the two choices. Policy type (Standard vs. Basic) is separate from threshold (verbal vs. zero).
• Thinking the verbal threshold blocks all lawsuits. It only limits noneconomic (pain-and-suffering) suits; you can still recover for serious injuries.
• Expecting UM/UIM on a Basic Policy. Basic carries no UM/UIM.
• Calling animal strikes "collision." They are other-than-collision.
• Memorizing a stale liability minimum. New Jersey has been raising minimums—hedge and verify.

Quick recap

New Jersey's personal auto policy uses the standard PAP Parts A–F skeleton but is governed by a no-fault / PIP system in which your own insurer pays your medical/economic loss regardless of fault (Standard PIP commonly $15,000, up to $250,000 for catastrophic injury). The two signature New Jersey decisions—Standard vs. Basic Policy and the Limitation ("verbal") vs. No Limitation ("zero") lawsuit threshold—are the most-tested items: the verbal threshold is cheaper but restricts pain-and-suffering suits to serious injuries, while the zero threshold costs more and preserves full suit rights. Standard minimum liability is commonly cited at 25/50/25 (verify—New Jersey has scheduled increases). UM/UIM rides on the Standard policy only, physical damage follows the national collision/comprehensive split, and DOBI under the Commissioner enforces it all.