If you’ve looked over your New Jersey auto insurance bill, you’ve probably seen that line item marked NJ PLIGA fee. Here’s an easy answer to what is the NJ PLIGA fee and how it works for all insured drivers in the state.
Imagine that your colleague Mary has not yet switched her insurance coverage to Plymouth Rock Assurance, and her carrier goes bankrupt tomorrow. Through no fault of her own, she is left without the coverage she purchased.
The New Jersey Property-Liability Insurance Guaranty Association (NJ PLIGA), which was created by state law in 1974, is Mary’s safety net in this situation. The Association covers policyholders and claimants of insolvent property-casualty insurance companies by making sure they receive statutory benefits.
All car insurance companies in New Jersey are required by the state to be members of this association and collect funds for its operations. The NJ PLIGA fee on your bill supplies a pool of money to pay claims (to policyholders and claimants) in the event an insurance company becomes insolvent.
It’s important to know that uinsured/underinsured motorist coverage is different than what the NJ PLIGA provides. Uninsured/underinsured (often abbreviated UM/UIM) coverage pays for property damage, lost wages and bodily injuries that the insured person and occupants of the insured vehicle sustain, if caused by a driver or owner of a vehicle who has no insurance (or does not have enough insurance) and is legally liable for an accident.
The uninsured or underinsured liable driver receives no benefit from the victim’s uninsured/underinsured coverage. However, if the liable driver is uninsured due to his/her insurance company becoming insolvent, NJ PLIGA kicks in.