Understanding No-Fault Insurance Laws

No-fault auto insurance is coverage that pays no matter who is at fault in an accident. Many states have no-fault insurance laws requiring residents who drive a vehicle to purchase no-fault insurance. Here are eight things that you need to know about no-fault auto insurance.

No-fault auto insurance is not available everywhere. No-fault auto insurance is not available in all states. No-fault insurance is required by some states and is an option in others. It is an alternative to the more common tort system, in which motorists can sue at-fault drivers for uncovered expenses as well as less tangible injuries, such as pain and suffering or emotional distress, resulting from an accident.

Pure no-fault insurance is not common. Under pure no-fault insurance, the insurance company would pay and no lawsuits would be allowed. In the U.S., no state requires pure no-fault insurance. Instead, depending on the state, motorists may be able to sue for expenses above the coverage limit on their no-fault policy or for claims above a set amount.

Hybrid no-fault insurance may be an option. Some states have a hybrid no-fault auto insurance plan in which consumers have the option of choosing a strict no-fault insurance plan in which they can't sue another driver who is at-fault in an accident and also can't be sued themselves if they are at fault in an accident.

Most no-fault coverage is limited. Most no-fault insurance pays medical costs and other covered expenses only to the policy limit. It does not cover pain and suffering or costs that exceed the policy limits.

PIP is the same as no-fault insurance. Another name for no-fault insurance is personal injury protect or PIP insurance, which covers injury-related expenses.

Specific no-fault coverage varies. What no-fault auto insurance covers varies by policy. Items most often covered by no-fault insurance include medical costs, lost wages, compensation for loss of services, funeral expenses and death benefits.

There are benefits to no-fault insurance requirements. Among the rationales for offering (or requiring) no-fault insurance is that, in theory, it should result in lower premiums because of reduced legal costs and fewer lawsuits. In addition, it should result in quicker payment of claims, since there is no need to dispute who is liable in an accident and, therefore, whose insurance company will pay.

Some criticize no-fault insurance laws. There are several criticisms of no-fault auto insurance. First, some critics say that it protects bad drivers, who can hide behind no-fault coverage and not take responsibility for their liability. Second, it has not eliminated lawsuits. Because most states still allow lawsuits in some situations, litigation remains a cost of insurance. And third, many claim it does not result in lower insurance premiums.

Sources:

www.autoinsuranceweb.com, "No Fault Auto Insurance"

www.autoinsuranceindepth.com, "No Fault Insurance Explained: Understanding No Fault Auto Insurance Law"

www.eqgroup.com, "No Fault Auto Insurance Explained"