No-Fault Car Insurance

What is No Fault Car Insurance?

No-fault car insurance is a policy that covers its holder in the event of an accident without determining fault.

There are currently 11 US states that operate under a no-fault system, and in those states there are a few variations. Basically, this system is different from the traditional tort or fault system, in that it guarantees compensation for a policy holder at-fault or not and limits suing rights. However, in order to get this type of car insurance you must live in one of these states.

These states include: New Jersey, Pennsylvania, Michigan, New York, Minnesota, North Dakota, Utah, Hawaii, Kansas, Kentucky, and Massachusetts.

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How does No Fault Coverage Work?

The theory behind no-fault coverage is that most claims can be settled without litigation and without determining who is at fault, which should lower costs for everyone and expedite compensation to the policy holders involved in accidents. No-fault insurance allows for injured parties to sue for compensation for pain and suffering only in cases of exceptional severity, which varies from state to state. This is different from the traditional fault system in which drivers always have the right to sue a negligent driver for damages.

When you sign up for no-fault insurance you relinquish your right to sue or be sued by other drivers in non-extreme cases in return for immediate medical coverage after an accident. Some states, however, allow injured parties to sue if their injuries meet a certain standard of severity, while others allow it when total costs reach a certain dollar level.

What Does No Fault Insurance Cost?

Because of fewer litigation fees, costs of no fault insurance should be lower than policies under the traditional tort system and in some cases are. Unfortunately, due to fraudulent medical practices and elaborate scams that found loopholes for suing with fabricated circumstances, places like New York have experienced an increase in rates.

Some states allow for drivers to choose if they want to drive under no-fault or traditional fault insurance. Those that choose no-fault are not able to sue or be sued while drivers that opt for the traditional insurance are. In states where they are sold side by side, no-fault insurance is often much less expensive.

Who Should Get No-Fault Auto Insurance?

No-fault typically protects drivers from being sued in accidents where they are at fault. In this sense it is most useful to the driver who is the cause of an accident. While no one plans on getting in a wreck, this provides immediate compensation for those that find themselves at fault. However, as it was stated earlier, no-fault policies are available only in limited parts of the country.

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