UPDATED: Mar 13, 2020
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What is no fault automobile insurance coverage? In some accidents, it’s crystal clear which driver was at fault: the culpable driver ran a stop sign, ignored a red light and kept going, or ran down a pedestrian while driving drunk. The fault can and should be attributed to the driver who broke the law and created an unsafe driving situation.
But sometimes, “fault” in an accident is a little more ambiguous. Maybe an invisible patch of ice sent your vehicle spinning out of control. Maybe you, the car in front of you, and the car behind you were involved in a pile-up on a busy highway. Maybe a traffic light malfunctioned and you didn’t know it was your turn to stop. For some states, ambiguous situations like these (and many more) may be classified as “no-fault” accidents. Coverage of this variety ensures that your car insurance provider will cover all of your damages in the event of an accident. This is regardless of who is at fault, and up to the policy-specified limit. Other drivers involved are protected by their own car insurance plans.
How No Fault Automobile Insurance Works
Most car insurance companies have elements of no fault coverage in some of their policies, so you may already be familiar with the concept on some level. Property damage insurance, like Comprehensive and Collision, already functions in this fashion. However, there are certain drawbacks to this kind of policy: for example, if the other party is deemed to be at-fault, you will have no legal recourse to sue.
What are No Fault States?
If you aren’t sure whether or not you live in a no-fault state, now is the time to get educated. Currently there are twelve States (and Puerto Rico) that use some form of the No Fault Auto Insurance System:
- New Jersey
- New York
- North Dakota
The purpose of the no-fault system is generally two-fold. Firstly, it facilitates medical treatment to car accident victims. Without having to wait for the insurance company to determine who is at fault, victims are eligible for immediate funding in emergency situations. The second is to reduce monthly insurance plan payments.
It should also be noted that in Kentucky, New Jersey, and Pennsylvania, you have a choice between accepting a no-fault policy, or purchasing a “traditional tort” policy. Traditional policies, depending on your state laws, may permit you to sue at-fault parties for pain and suffering. No-fault policies do not offer this additional legal option; you can only sue for the cost of your medical expenses and property damage repair/replacement.
In most cases, insurance companies make payouts based on the severity and culpability of the accident. The intention of a no-fault system is to lower the amount of cases in court and also to avoid “frivolous” lawsuits (such as lawsuits aimed at financial compensation for pain and suffering associated with a serious accident). In theory and sometimes in practice, this keeps your insurance premiums from rising significantly higher after the accident and can also keep your legal fees lower. But if your accident does result in pain, suffering, lost wages, and more, you might not have the ability to take the culpable party (or parties) to court.
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No Fault State Laws and Unforeseen Consequences
Every state is different, and by the same token so are their laws. So, if you live in a No Fault state, it is important that you understand their requirements.
Laws will vary, as none of the states have a purely No Fault system. Some states allow for lawsuits in a limited number of situations. But most no-fault laws will have some of the following in common:
- As stated, plans under this system don’t allow for pain and suffering claims, and don’t allow you to sue for them.
- No-Fault Plans do not cover you for auto damages, Collision, or Comprehensive claims; other components of your insurance policy are designed to take care of this.
- Insurance covers you and those in your policy for medical bills, lost wages, etc.
- In the cases where you are allowed to sue, you can’t do so until No-Fault car insurance expenses pass a certain threshold.
Even though this type of system is aimed at reducing costs, it is creating a number of problems. Medical fees are on the rise, special-case lawsuits are increasing, and fraud is wreaking havoc. These problems are causing auto insurance companies to either raise premiums, or reduce the amount of business they conduct in these states.
If you live in any of the no-fault states listed above and you’re worried about high insurance premiums, enter your zip code below to make sure you’re getting the rate you deserve.