Is it just me, or does this seem like a dream come true? Because you have no-fault insurance, you don’t have to worry about whether you were at fault for the car accident (unless you get a ticket, but that’s another issue). Sounds ideal, but what exactly is it?
In no-fault states, each driver or his insurance covers his own medical expenses and property damage, regardless of who was at fault. You lose some of your legal rights, but you usually get out of it with no debt.
But it’s not as easy as it seems. Depending on the state you live in, you can obtain different types of auto insurance. Additionally, there are contrasting views on whether no-fault insurance is a fair value. For certain drivers, it might be beneficial, but not for others.
The tort system serves as the foundation for conventional auto insurance. A civil wrong known as a tort is one that does not involve a breach of a contract. The amount that auto insurance companies pay for an accident in jurisdictions with a tort system depends on who is at fault, or who is more at fault. People involved (or their insurers) may file a lawsuit to seek compensation for their injuries and/or property damage if there is a dispute on who is at fault.
Suing can be costly and time-consuming. Twenty states made the switch to no-fault regimes in the 1970s. The idea was that drivers would be able to receive compensation for their damages or injuries right away without having to establish blame. Additionally, it was believed that avoiding expensive lawsuits would aid in lowering insurance prices.
However, after a while, insurance costs started rising again and were frequently higher in no-fault jurisdictions. No-fault statutes were repealed in a number of states. Only 12 states and the District of Columbia had no-fault statutes as of the beginning of 2012.
Discover what no-fault auto insurance actually entails by reading on.
The Workings of No-Fault Insurance
Although no-fault insurance may sound appealing, having it does not automatically grant you the right to escape an accident unharmed. This is how it goes:
You file a claim with your own insurance company for your losses or injuries if you are in an accident. Whoever caused the accident doesn’t matter. But there’s a catch: You can’t file a lawsuit to force the at-fault driver or his insurance provider to make payment. This could explain why no-fault insurance is often known as personal injury protection (PIP).
It gets tricky since drivers can get no-fault insurance in some states but not in others. New Jersey, Kentucky, and Pennsylvania drivers are unique in that they have a choice between the two. Any passengers in the car at the time of the accident may be covered by the driver’s insurance in some areas; otherwise, your passengers would be responsible for their own insurance.
What occurs if you get into an accident in a state where no-fault insurance is mandated? No matter what, lawsuits would not be permitted in a “genuine” no-fault state. Although no state has such a strict rule, “genuine no-fault” states are those where PIP insurance is required and it is challenging to file a lawsuit. If the losses involved exceed a certain amount, drivers can still file a lawsuit in all states that mandate no-fault insurance. They can typically only seek actual damages—not “pain and suffering”—in court. By state, the threshold varies. There are primarily two types:
- Financial cutoff: If a person’s medical bills exceed a specific dollar amount, some states permit litigation.
- Verbal threshold: If injuries are deemed “severe,” certain states instead permit filing a lawsuit. Although jurisdictions define what constitutes “serious” differently, death is typically thought to be serious enough.
No-fault insurance “add-on” is permitted in several states. In some states, a driver may pay an additional fee to increase PIP coverage under an insurance. No matter who was at blame for the collision, the motorist will be compensated in the event of injuries. But the driver can still file a lawsuit to recover damages for “pain and suffering” in addition to injuries. In addition, the driver is liable.
There are also states with “option no-fault insurance” statutes. Although they differ from state to state, these systems essentially provide drivers the option of choosing whether they want to be covered by a no-fault plan or retain greater rights under the traditional tort system. If you choose no-fault, both your and other people’s ability to sue you is constrained. Unless the other driver also selected no-fault, you may file a lawsuit if you don’t choose no-fault. Although the classic tort option typically costs more, it may result in higher payouts in the event of an accident.