No Fault Insurance: Explanation Of No Fault Insurance

The heated debate regarding the wisdom of no fault insurance still burns brightly forty years later. It was put in place to regulate the financial costs resulting from automobile accidents. No fault insurance means no litigation will be allowed whether you are at fault or the other driver is at fault. This was the driving force behind the concept of no fault insurance. The court system was inundated with cases involving car accidents. The time taken for investigations, defenses, witness testimony, and so on for each and every case was causing unreasonable delays for everyone who wanted their day in court.

There are very few states that currently mandate no fault insurance and even fewer offer it as an add-on to your vehicle insurance. The states that have made no fault insurance mandatory are: Florida, Hawaii, Kansas, Kentucky, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Pennsylvania and Utah. The states that offer no fault insurance as an add-on are: Arkansas, Delaware, D.C. and Maryland.

There are three aspects to no fault insurance: personal injury protection (PIP), property protection, and residual liability insurance. Depending on which state you live in all or only parts of these categories can be either mandatory or voluntary.

Personal injury protection (PIP) covers the expenses you, or any other drivers that live in your home, incur when you are physically injured in a car accident, including hospital bills, income lost, and any other related expenses, including possible funeral costs. PIP can also cover the passengers in your car, pedestrians, and motorcyclists that happen to be injured by an accident involving your car.

Property protection covers the cost of repairs to any damage your vehicle causes to property including land, structures, fences and legally parked cars.

No Fault Insurance: Explanation Of No Fault Insurance

Residual liability insurance can cover you for the few incidences where it is possible to be sued. Some states with no fault insurance will allow you to be sued if you are liable for an accident that results in a person sustaining a very serious injury or being killed. If you are responsible for an accident in a state without no fault insurance or with a car from a state without no fault insurance, they can sue you for injury and damages.

In general terms, no fault insurance means if you are in a car accident, your insurance will cover your injuries and property damage and may also mean you cannot sue the other person.

No Fault Insurance: When Is No Fault Insurance Important?

No fault insurance was brought into this world to do good, and it is important for a number of reasons.

A benefit to the driver who has no fault insurance is that he can file a claim right away and receive compensation quickly whether he is at fault or not. Vehicle repair costs are expensive, as are medical bills and even funeral costs. If you sustain bodily injury, you may lose wages for a few days, or even weeks or months. Most people cannot afford expenses and losses of this magnitude and receiving an insurance indemnity soon after an accident can save them from ruin.

In the past, it took months and even years to settle an accident. First you waited for your insurance company to do an investigation and decide who was at fault; then you waited for a court date, which could take weeks and even months; then you waited for a ruling on your judgment or settlement, that is, if you were not liable. In the meantime, at the very least, you had a damaged vehicle; at the very worst, your family was burdened with medical and even funeral bills, not to mention your lost wages.

Another benefit for the driver with no fault insurance is, if you are the cause of an accident, you cannot be sued for bodily injury, property damage, or pain and suffering. Most vehicle accidents are just that, an accident. No one purposely causes an accident, nor do many people walk away from an accident unscathed. In the past, courts have awarded millions of dollars to victims of automobile accidents, resulting in the financial collapse of the liable driver. No fault insurance covers the costs of medical bills and repairs that each person sustains in an accident.

No fault insurance has also helped keep vehicle insurance rates down. Over the last forty years or so, no fault insurance has begun a trend that sees fewer and fewer automobile accident cases going to court, even in states that do not enforce no fault insurance. This trend has resulted in vehicle insurance companies handling most claims internally and awarding settlements through arbitration and negotiation. This has had a stabilizing result on vehicle insurance premiums.

No Fault Insurance: When Is No Fault Insurance Important?

No fault insurance will not, however, protect you from being sued if you cause an accident due to intoxication, cause damage or injury intentionally, or commit a crime using your vehicle. You still need to obey the laws and be a responsible driver.

No Fault Insurance: No Fault Insurance Rates

No fault insurance can be very affordable, even for substantial coverage. When buying your no fault insurance, you will want to remember it is your expenses that you are covering. It is wise to give yourself and your family as much help as you can if you are involved in an accident.

There is a mandatory minimum coverage that most states with no fault insurance require. Vehicle insurance with basic no fault coverage can cost as little as $20 per month, but is very limited and will not be of any significant help if you are seriously injured. The most basic no fault insurance policy includes medical expenses, lost wages, and damages to land and structures at a rate of 10/20/10, which means:

  • $10,000 per person hurt or killed.
  • $20,000 per accident if several people are hurt or killed.
  • $10,000 for property damage in another state.

No fault insurance is only a part of your vehicle’s insurance; you need to also cover damages to your own vehicle with comprehensive and collision coverage. It is highly recommended you have better coverage with higher indemnities as accidents are almost never inexpensive. In fact, D.C. has a minimum requirement of 25/50/10. Many no fault insurance companies can offer you additional coverage such as an increased limit on your per person rate of up to $175,000.

There are several ways you can reduce your premium and perhaps afford more coverage. Your no fault insurance premium is based on a number of factors, including:

  • An excellent driving record. The fewer accidents and tickets on your record, the lower your insurance rate.
  • If you have a high credit rating you are a low financial risk to the insurance company; therefore, you will have a lower premium.
  • If you are a young driver your rates will be quite high. If you are over 55 years of age, your rates will also be higher.
  • A new driver’s rates are higher than an experienced driver.
  • If you live in an area with a high crime rate, your rates will be higher.
  • Good school grades will lower your rates.
  • Taking driver safety courses will lower your rates.
  • If you own a powerful sports car, your insurance rates will be higher.

Remember that no fault insurance financially covers you and your family if you are in an accident, whether you are at fault or not, so make sure your insurance coverage is sufficient.

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