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UPDATED: Jun 2, 2020
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Depending on the motor vehicle insurance laws in your state, you may or may not have no-fault insurance. The question of which companies offer no-fault insurance is more an issue of individual state regulations than the insurance companies themselves. Nonetheless, it’s safe to say that insurance companies operating in no-fault states must provide no-fault insurance by law.
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For purposes of definition, a no-fault state is one that does not allow car insurance companies to settle claims by assigning fault to the various drivers involved. Rather, each insurance company is responsible for covering the claims of the drivers they insure. This ostensibly streamlines the insurance process and keeps unnecessary lawsuits out of the court system. On the other hand, it also creates some unique problems for drivers and passengers who feel they have a strong civil court case.
What does it mean to have no-fault insurance?
No-fault insurance generally works the same way that a homeowner’s policy would. Each individual policyholder purchases coverage to protect himself, his passengers, any third-party property he might damage, and his vehicle.
Any claims that might arise from an accident will be handled by the insurance company according to the terms of the policy contract.
This will be true regardless of any other drivers who might have been involved in an accident. Sometimes insurance companies will argue between themselves about payment, but ultimately each one is responsible to make sure their customers are taken care of.
The details of what is covered under no-fault insurance vary from state to state. As an example, drivers in the state of Michigan benefit from one of the most inclusive no-fault laws in the country. Their insurance is required by law to cover unlimited medical and rehabilitation benefits for any individuals covered under the policy. Michigan law also allows vehicle damage to be included as well.
What is the purpose of no-fault insurance?
What are the No-Fault Insurance States? The Insurance Information Institute lists 12 states currently operating on a no-fault basis: Florida, North Dakota, Kentucky, Minnesota, Hawaii, Kansas, Massachusetts, Michigan, Pennsylvania, New Jersey, Utah, and New York. Puerto Rico qualifies as the lone U.S. territory also operating as no-fault. The fuel behind the decision of these states to go no-fault was a desire to increase efficiency in settling accident claims and reduce the caseload in civil court. Statistics suggest that those purposes have largely been achieved.
The idea behind no-fault insurance is to reduce the number of disputes between drivers and their insurance companies. Rather than blame being assigned through a civil court proceeding, the police report of an accident is used by insurance companies to make that determination.
The insurance companies involved are free to negotiate among themselves regarding who pays what, but each one is ultimately responsible for making sure that their customers are properly covered.
As a general rule, civil lawsuits for car accidents are not allowed in these states, unless a crash results in a serious accident or death.
Can I purchase no-fault insurance if I live in a fault-based state?
Since no-fault insurance is a matter of state tort law, it is not an option insurance companies have. Therefore, if you live in a fault-based state you will not be able to purchase a no-fault insurance policy. Even if it were legally allowed, most insurance companies would not go for it because it is inherently more expensive.
For example, without the deterrent of civil litigation, the number of insurance claims is likely to go through the roof. This would, in turn, cause higher prices. A person needs only to look at no-fault states like New York and Pennsylvania to see this principle in action.
Also, purchasing no-fault insurance in a fault-based state would make no financial sense for the individual consumer either. Most fault-based states don’t require drivers to carry a specific amount of personal injury protection (PIP) because those costs can be covered through individual health insurance policies or through a judgment against the driver who caused the accident. In no-fault states you don’t have that option, which automatically requires you to then carry tens of thousands of dollars in PIP protection.
At the end of the day we can safely say that any company offering no-fault insurance is doing so because one or more of the states where they do business requires it. In states that don’t require no-fault insurance, those same companies will offer policies accordingly.
Whether you live in a no-fault or a fault-based state, you can search online for car insurance quotes by entering your ZIP code below.