No Fault Insurance - Explanations and Costs
What, exactly, is no fault auto insurance? Well, it is a general term used to describe any car insurance policy that requires both car owners carry insurance for their own protection, as well as places limitations on their ability to sue other drivers for damages. So in an accident, under no fault laws, your car insurance company will pay for your damages (up to your policy limit), regardless of who was at fault for the accident. Any other drivers involved will be covered by their respective car insurance policies. Under an ideal no fault insurance system, a driver will be completely covered by his own policy, and can never sue another driver for damages.
However, no state in the US has such ideal "no fault" systems in place. Instead, all no fault states combine the no fault system and the traditional liability system (under which you are liable to pay for the damages you cause). So you should know what your state permits before you invest in a no fault insurance policy.
The Benefits of No Fault Auto Insurance
Naturally, the benefits of no fault auto insurance are many. In the first place, it guarantees every driver medical treatment in case of an accident. Plus, it is intended to reduce legal and administrative fees associated with insurance claims, which means lower premiums. However, in such cases, premium costs effectively increase owing to liability claims.
As part of your car insurance policy, the no fault insurance clause is commonly called personal injury protection (PIP), within which you may find subheads such as optional basic economic loss (OBEL). In the US, different states offer different PIP packages, but basic benefits include medical costs, loss of wages, and compensation for loss of services, funeral expenses, and death benefits.
Know Your State's No Fault Auto Insurance Rules
Obviously, the amount and type of PIP varies from state to state. In Pennsylvania, Kentucky, and the District of Columbia, for example, drivers can choose whether or not they want to purchase PIP and drive under the no fault system, or whether they want to stick to the standard liability system. To some, this makes sense because since no state is totally no fault, drivers can be liable for certain kinds of damages anyway.
As critics point out, no fault insurance is usually expensive. So if you live in a no fault state, it's important that you shop around for the best deals, preferably on the Internet. No fault insurance aims to lower the premiums by avoiding litigation over the cause of an accident, while making immediate payment for injuries. However, critics also point out that this means reckless drivers often get off scot-free because many cases don't go to trial.
Nonetheless, since car accidents are inevitable, guilty drivers should not always be punished, and the presence of no fault insurance prevents such drivers in tort (or at-fault) systems from considering the lawsuit against them as punishment.
So start looking for the best deals today. In the highly competitive US car insurance industry, cheap no fault insurance will not be difficult to find.
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