Understanding No Fault Insurance

Most people who have a driver’s license and who drive a motor vehicle understand that you need to have insurance coverage in order to legally drive a vehicle on the roads.

This insurance is to protect yourself as well as other drives and personal or public property in the event you are in an accident while you are driving.

There are varying levels of automotive insurance cove rage that you can sign up and pay premiums for, and there are also different types of insurance.

One common type of auto insurance that you will likely hear as you research insurance policies is something known as No Fault Insurance.

The way it works is a little complicated, but it is important to understand the basics of this kind of insurance. “Most states follow the rule that if you are involved in a car accident and you are injured, then you have the option of bringing a claim for compensation against the negligent driver — usually through that driver’s insurance company.

In that situation, as part of the “third party claim” process, you must convince the other driver’s insurance company that its own insured was at fault for the car accident.

Only then can you collect any damages for your injuries… Even after all of that, the other driver’s insurance company may still deny the claim, forcing you to file a lawsuit.

Because pursuing an insurance claim in that manner can be an expensive and time-consuming endeavor, several states have changed their automobile insurance systems and instituted “No-Fault” insurance coverage” (Nolo).

How no fault insurance works

No Fault Insurance is a general term that can be applied to any auto insurance policy or coverage plan that both requires drivers to carry insurance that takes care of their own protection and vehicle coverage, while at the same time placing limitations on their ability to sue other drivers over damages that they may have caused if they were at fault for the accident.

In the event of an auto accident where no fault laws are applied, your auto insurance company would pay you for damages to your car, lost wages, and medical expenses up to the limits established in your policy contract.

This would be done regardless of who was at fault for the accident. Any other drivers who were also involved in the same accident would have their individual auto insurance policies covered them and their expenses.

Under a pure no fault system, drivers would be completely covered by their own policy, and could never attempt to sue another driver to seek more compensation for an accident they were at fault for.

However, it is very important to note that there are no states that uses a pure no fault system.

Instead, all “no fault” states essentially use a combination of the no fault system and the standard liability system to hold drivers accountable for accidents that have been caused by negligence or recklessness on their part.

States can allow lawsuits to be filed against one party in an auto accident in certain cases. Obviously, it’s a good idea to understand your state’s requirements and to know what you will and will not be covered for and what you will and will not be held responsible for should you be at fault for an accident.

The no fault policy

The actual no fault portion that is included on your auto policy contract will likely be called personal injury protection, or be referred to as the PIP portion of the policy.

But parts of the policy may come under different names (like OBEL, for “optional basic economic loss”).

It is important to review all parts of your insurance policy contract, understand what every section covers, what all the terms mean, and what you are and are not covered for.

Any questions you may have or any areas that are unclear to you need to be discussed with your policy provider so you fully understand all the terms.

It is important to remember that each state is different so if you move out of state you will need to be extra careful about the terms and limitations of PIP coverage for your new state of residency.

“Different states’ PIP packages cover different things, but in general benefits will include most injury-related expenses.

The most common benefits are medical costs, loss of wages, compensation for loss of services, funeral expenses, and death benefits.

The amount and type of PIP required varies from state to state. In Pennsylvania, Kentucky, and the District of Columbia, drivers can actually choose whether or not they want to purchase PIP and drive under the no fault system. (If not, they operate under the standard liability, or tort, system.)

And remember, because no state is pure no fault, drivers can always be held financially responsible for the cost of injuries they cause in certain circumstances” (Auto Insurance).

Some states so permit injured parties to sue if they sustain significant injuries, experience extreme medical bills, or if the accident was believed to have been caused by the negligence of another driver.

If you are in an auto accident that you are at fault for and the other driver tries to sue you, your standard insurance policy is what will hopefully absorb most of that and greatly reduce the amount you are required to pay in the event you are successfully sued for damages by another driver.

This is an example of why liability insurance is still so important, and why and every no fault state requires drivers to have it as part of their policy.

FAQ

Is no fault insurance optional?

No-fault insurance is currently mandatory for legal driving in 18 states. It is important to note that, some states require that medical expenses caused by the accident be payed through med pay or what is also know as medical payments insurance, not no-fault insurance.

What does no fault insurance cover? 

Here are three of the key things this insurance covers for policy owners and their passengers:

• Hospital and medical fees and expenses sustained due to injuries caused by the accident
• Income losses caused by the inability to work due to injuries from the accident
• Funeral expenses in the even someone dies in the accident

Does no fault insurance cover theft? 

No Fault Insurance policies are not used to cover theft of your vehicle or item in your vehicle. Instead, it is your comprehensive insurance policy that will be responsible for covering losses or damages from the theft of your vehicle or your possessions.

Does no fault insurance help pay for damage? 

In most cases, any type of damage to your vehicle due to an accident, hit and run, parking mishap, or any other incident involving cars would be covered by either your collision insurance or the other driver’s liability policy.

Tips to find the best rate

When you are looking for the right auto insurance in your area you need to think about a few key things in general, regardless of whether you need no fault, limited liability, or standard insurance. Here are four ways to get the best rate you can:

Ask for discounts. Many companies reward drivers who have safe records and a good history of making payments by giving them better prices and rates on the best plans they offer.

Check rates before purchase. People are often surprised to see how much rate can vary from one place to another, so be sure to shop around and compare prices before making a choice.

Get discounts for equipment. If your vehicle has new safety features like lane assist, rear-view cameras, and enhanced locking systems you could get some savings on your policy rate.

Improve your driving skills. A good track record can go a long way in showing you are a safe and responsible driver so if you have a good record use it to negotiate better rates or coverage.

To learn more about auto insurance, including no fault, contact us today!