According to Insurance Information Institute, the term no-fault auto insurance refers to an auto insurance program, which allows policyholders to recover financial losses from their insurance providers regardless of fault. In a no-fault auto insurance, your insurance providers pay for all the injuries, and damages that may arise from an accident not considering who is responsible for the accident. It basically operates on the rule that no single driver was at fault in a car accident.
When settling a no-fault claim, no fault is determined in a car accident, and each injured party is compensated by their respective insurance provider. However, one thing to take note of is that there’s a limit set to what your provider can compensate. Once the expense overshoots the maximum, you need to come up with a balance to take care of your claim or by suing the wrong motorist to get your required compensation.
Many states in the US have adopted the no-fault auto insurance to accelerate the process of the claim for trivial auto injuries, reduce the number of auto claims, and save the time and money for insurance providers, which may arise from unfair or frivolous lawsuits. Therefore, the no-fault insurance coverage available differs based on your location.
There’re three main types of no-fault insurance policies, which include;
The add-on plan is available only in a few states and is not considered a true no-fault policy because it allows the parties to sue the other party for damages, pain, and suffering. In add-on states, motorists receive compensation from their insurance providers as they do in no-fault states, but there’s no restriction to lawsuits.
Therefore, just like the name suggests, this kind of policy is essentially an add-on coverage to your conventional car policy, since you receive compensation from your provider without having to prove the fault of the other party, and you still have the right to sue the guilty motorist as well.
Choice of fault coverage
Only three states, Kentucky, New Jersey, and Pennsylvania, offer choice no-fault coverage. Here motorists have the option of either strictly receiving no-fault benefits without having the right to sue the negligent party, or refuse the no-fault coverage and hold on to the right of suing the other party.
In most cases, if you opt for no-fault coverage, your compensation premium is considerably lower compared to refusing no-fault benefit. However, to take the second route, you must be dead sure that the other party violated the rules and is responsible for the fault.
Modified no-fault coverage
States with modified no-fault auto insurance look to limit your right to recover the damages from the negligent party. The cover allows the injured party to sue only if the damages exceed either the monetary or verbal threshold, whatever the state allows. If the amount is lower than that, it should be collected from the injured party insurance provider. Only severe cases are compensated.
No-fault damage insurance system has several benefits including quick processing of claims, reduction of court cases and keeping the prices of insurance down.