What is no-fault insurance?
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Asked May 12, 2010
On the surface, no-fault insurance coverage is car insurance that covers the policyholder and his or her passengers with no regard for who was found to be at fault in the accident itself. In other words, if you are in a state where no-fault coverage is required and are hit by someone else, your insurance will pay for any injuries to you or your passengers, and the other person's insurance will pay for theirs. And while this description is technically correct, there is much more to no-fault insurance, and why it is used.
No-fault insurance does not usually coverage property damage, only bodily injury. If no-fault is the only required coverage in your state, it is a good idea to add collision coverage to protect yourself against property damage, including damage to your vehicle. Most state will require a minimum amount of property and bodily injury liability insurance, but make sure that those minimums are sufficient for your needs. No-fault only applies to injuries and immediate health concerns, all other costs are paid according to who is actually the cause of the damages, and why.
Keep in mind no-fault insurance does not mean that the one who caused the accident goes unpunished. That person is still responsible for any laws they have broken as well as the costs of the accident. The difference is that your injuries can be attended to immediately, without having to verify which insurance company is going to pay the costs. After the fact, insurance companies will negotiate settlements or seek other means of restitution.
No-fault insurance also limits the injured party's ability to seek litigation. What this means is that less insurance money is being spent in courts, and more of it is being used for the purposes of resolving the costs associated with accidents. In most situations, no-fault insurance equates to lower overall insurance rates than other states. The benefits for everyone are lower insurance costs, and the assurance that your own insurance is going to cover any accidents, eliminating the worry of being hit by an uninsured motorist.
On the down side of no-fault insurance, it does not provide any method of legal actions against persons who are reckless, or wantonly in contempt of the law. Many people who are critical of this type of coverage say that it does not make allowance for true accident victims who have been extraordinarily affected by another driver's blatant actions. Some states make exceptions to no-fault coverage to address this issue, and the specifics of your no-fault coverage will differ from region to region or just between different insurance companies.
Answered May 12, 2010 by Anonymous