State Required PIP Insurance
Personal Injury Protection (PIP) auto insurance is no-fault insurance. If you have PIP coverage, it pays for your medical bills after a car accident, regardless of who was responsible for the accident. Some states make it mandatory for licensed drivers to carry PIP, while other states require liability insurance and divide responsibility for the accident's costs based on who was at fault.
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Fault
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The original standard in auto accidents was "contributory negligence," according to the Car Insurance Quotes website. Insurance adjusters or a judge would determine which individual was at fault; this driver couldn't sue anyone, but the other individuals involved in the accident could sue him. Some states still use that standard, but others have gone to comparative negligence: Two drivers can each take a portion of the responsibility -- 45 percent against 55 percent, for instance -- and sue for that percentage of their damages. No-fault is yet another alternative.
No-Fault
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No-fault insurance developed in the late 1940s in Canada, then spread to some American states. In no-fault states, the driver purchases PIP insurance to cover injuries up to the maximum on the policy. The theory behind PIP is that because motorists don't have to sue to get money, the court system is free to deal with larger lawsuits, and it reduces the insurance company's legal expenses, which helps keep rates down.
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Lawsuits
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In practice, PIP insurance doesn't prevent lawsuits, according to the Nolo legal website. If your medical bills are more than the policy covers, you may be able to sue the other driver to get more money. Some states only allow you to sue if you have serious injuries, while others require that your uninsured losses cross a certain monetary threshold before you can take action to collect from any of the other drivers. If you want to claim damages for emotional distress caused by the accident, a lawsuit is the only option.
Options
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States with no-fault laws require that you take out a minimum dollar value of PIP insurance to reduce the need to sue. They may also require you to take out liability insurance to cover property damage, as PIP only covers injuries. Pennsylvania and New Jersey use an "optional modified plan" for auto insurance: You don't have to take out PIP, but if you do, you can't sue or be sued after an accident.
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