What is "No-Fault" Auto Insurance?

People often misunderstand and misquote auto insurance terms, especially when they are trying to win an argument about an accident. The line, "isn't XXX state a no-fault state?" is often used to try to convince adjusters that there shouldn't be a liability decision made on a claim. This, however, is not the meaning of this term and knowing the meaning could save you a lot of time and money. If you have ever wondered what "no-fault" is in auto insurance terms, you are about to find out.

First, a little background on how auto insurance claims are handled in the event of an actual auto accident between two vehicles. Both parties are insured by different insurance companies in most cases and this causes separate investigations by each company as to who is responsible for the accident. In the event that an insurance company decides that their insured driver is responsible they will pay for the damages to the vehicle and any injuries incurred by the driver of the vehicle.

Usually, no payments will be made by another insurance company (and sometimes your own insurance company) until fault is assessed in the claim. This causes delays in payments and treatments of injuries that causes much grief in the life of the drivers involved. What happens in a no-fault state is that the insurance companies do not wait for decisions to be made on who is at fault, they start issuing payments to the injured parties as soon as possible.

The benefits to insurance companies and to individuals involved can have a great impact on the financial stability of both. The individual may need the money to start treatment and be able to recover and possibly even return to work sooner. The insurance company will avoid paying for longer or more in-depth treatment for someone who had a condition get worse because of the lack of medical attention. When this happens both sides when and the world functions a little better.

In the end, no-fault auto insurance laws are not designed so that the insurance company doesn't have to make a liability decision. These laws are in place so that the insurance company and the individuals involved can begin to move on sooner and correct the things that went wrong as a result of the accident. With this knowledge of the no-fault laws and system you will be more prepared when your next auto accident occurs, which is hopefully never!