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UPDATED: Mar 3, 2020
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No fault insurance is one of the different types of car insurance plans that are sold in the United States. Many states have this form of insurance available, some of which offer a pure version of the coverage, others have an add-on type of insurance, and at least one gives car owners a choice.
Even if you live in a state that offers no-fault, you must still carry the required state coverage minimums, in addition to extra coverage you may wish to purchase such as comprehensive and collision.
Read on to learn the definition of no-fault insurance, the benefits of having it, the different states with this type of insurance, and more.
But before you do be sure to enter your ZIP in at the top of this page for a FREE car insurance comparison!
No-Fault Car Insurance Explained
No-fault car insurance comes in several variations. The purest form is where each insured individual’s own insurance company will pay benefits in the case of an accident, regardless of who is at fault.
Personal injury protection coverage, which is mandatory for true no-fault states, provides for the first party benefits.
In such states, there are also limitations on the person’s ability to sue the other party. Damages and injuries must meet certain criteria in order for anyone to be able to sue the other.
There is typically a pre-set threshold, that is either monetary or verbal, which must be met before a lawsuit for pain and suffering can begin. In the case of severe injuries, even no-fault laws allow injured parties to sue the at-fault party.
There is also an add-on, whereby each party claims benefits from their insurer in the case of an accident. However, with this type of coverage, there is no limit on the ability to sue.
This is the case for auto insurance in Arkansas, Delaware, Maryland, Oregon, Texas, Washington, New Hampshire, South Dakota, Virginia, and Wisconsin. The District of Columbia has a blended system, whereby the car owner can choose which type of coverage he’d rather have.
The Benefits of Having No-Fault Auto Insurance
Many of the states that have put no-fault coverage in place, as their standard car insurance, have done so to reduce frivolous lawsuits. No-fault insurance effectively takes away the very popular option of suing the at-fault party in the case of car accidents.
There has been an abundance of lawsuits for pain and suffering in recent years, even in minor car accidents.
With courts awarding increasingly high amounts of money in such lawsuits, and the insurer often left holding the bag, the cost of car insurance is continually rising and affects all drivers.
By putting true no-fault insurance in place, individuals are limited in their right to sue and the insurance companies are doing more of what they are supposed to do – indemnifying actual losses.
Also, less litigation is taking place, which means less abuse and less congestion in the court system.
An extra benefit that policyholders enjoy is that when their insurance is paying for their losses, typically payment of claims is much faster because the two insurance companies are not bogged down in the details of who is responsible for the accident.
No-fault insurance is also making a big difference with the number of instances of insurance fraud and the careers of corrupt medical professionals.
In certain parts of the country, there have been organized criminals making big money from insurance scams, thanks to the help of corrupt lawyers and medical personnel.
This type of insurance makes it much harder to work such schemes thanks to the thresholds in place before litigation can take place.
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States that Have this Insurance
There are several American states, and Puerto Rico, which have no fault auto insurance in place. The plan differs in each of the states and requires car owners to have differing types of coverage as minimum state-mandated coverage.
However, they all require insured individuals to carry Personal Injury Protection (PIP) coverage to provide for their medical costs in the case of an accident. There are also restrictions on lawsuits, as well as either monetary or verbal threshold for lawsuits.
Below is a listing of the states with true no-fault car insurance.
- New York
- New Jersey
- North Dakota
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, 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.
No Fault Car Insurance Quotes Online
When you are ready to purchase car insurance for your vehicle, whether it is no-fault auto insurance or traditional coverage, the best place to start is online.
By using our free online quote tool, you can get a variety of quotes from insurers specializing in offering coverage to car owners in your state.
From there you will get all the information you need to compare and contrast quotes and plans, so you can make the best decision possible concerning your car insurance coverage.
Take a few seconds to start that process now by entering your ZIP code in our free comparison tool below!