The Pros and Cons of No-Fault Auto Insurance
In a no-fault system, your auto insurance company will pay your policy benefits no matter which party caused an accident. The other party’s auto insurer will pay that person’s benefits, regardless of who’s at fault, as well. The driving force behind the creation of the no-fault system was to avoid the often costly and lengthy trials that may be needed to determine which of the parties involved in an accident is at fault.
How benefits are paid
In order for the no-fault system to work as intended, drivers insured in no-fault states surrender some of their rights. For example, the benefits paid are typically limited to lost income medical bills, funeral expenses and death benefits. And, the amount the insurance company pays in a no-fault situation will not exceed the limits on your auto insurance policy.
Under the no-fault system, you are not allowed to sue the other party involved in the accident for non-economic damages; damages such as loss of a companion, or pain and suffering. The other party is not allowed to sue you either, even if you caused the accident.
Possible exceptions
However, depending on your state’s no-fault insurance laws, it may be possible to directly sue the party that was at fault in the event your economic damages are greater than what has already been paid by your auto insurance company. No-fault insurance can be complicated. Therefore, if you’re involved in an accident, you may wish to consult with a lawyer who has experience in personal injury.
What else you should know
Policyholders in no-fault states typically pay more for their auto insurance premiums than policyholders in states that have not adopted this system. But since your auto insurance company pays your benefits, there usually is less paperwork involved which usually means that claims are processed more quickly.
The nine states that currently operate under the no-fault system are Florida, New York, Utah, North Dakota, Massachusetts, Michigan, Kansas, Minnesota, and Hawaii. The three “choice” states include New Jersey, Pennsylvania, and Kentucky plus the District of Columbia. In choice states, drivers can choose between purchasing a no-fault auto insurance policy or a tort policy.