How Does No-fault Car Insurance Work?
When two or more drivers are involved in an accident, auto insurers determine which drivers are at fault, and therefore which of their insurance policies covers damages to all property and persons. No-fault car insurance has each driver's own personal insurance pay for the damages caused to his property and person.
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Basic Premise
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After a driver with no-fault car insurance is involved in an accident, he submits a claim to his car insurance company to recoup any losses he suffered. Each driver's insurance company pays for the losses, even if one of the drivers was unquestionably at fault. This method allows a driver to collect benefits immediately from his insurance company instead of waiting for the insurance adjuster to determine fault and work with the at-fault driver's insurance company for benefits.
Lawsuit Threshhold
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Even if a driver has no-fault car insurance, he sometimes can still sue the other party involved in an accident to receive compensation for pain and suffering and to treat severe injuries. The monetary threshold for lawsuits varies from state to state. Some states have a dollar limit on medical bills that must be reached before someone can sue. Other states use a threshold based on a description of the type of injuries, such as death or significant disfigurement, for which a party can sue.
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Limited Availability
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No-fault car insurance is available in only some states. As of 2011, state laws in nine states plus Puerto Rico require drivers to purchase no-fault car insurance. These states are Florida, Michigan, New York, Massachusetts, Hawaii, Kansas, Minnesota, North Dakota and Utah. In addition, drivers in three other states, Kentucky, New Jersey and Pennsylvania, can choose whether they want no-fault auto insurance or traditional insurance. Many other states have had no-fault car insurance in the past but have since repealed the laws and changed back to traditional car insurance.
Benefits and Drawbacks
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The main benefit of no-fault insurance is that it allows insured parties speedy access to compensation for accidents. It also benefits states by reducing the percentage of car accidents that result in lawsuits, which, in turn, reduces pressure on the court systems. However, no-fault insurance also has its drawbacks. Some people and medical practitioners abuse the system by filing phony claims for expensive medical treatments. This can increase the cost of insurance premiums for everybody.
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