What are fault-based and no-fault car insurance policies?


These insurance policies determine how the medical costs and property damages of drivers involved in an auto accident are paid. Determining whether who is at fault in the accident and who has to pay generally depends on which state the accident had occurred, and state laws vary significantly. So it is recommended for drivers and motorists to know whether the states they are in have fault or no-fault based policy system. Legal counseling with a lawyer is also recommended.

The fault-based policy has the at-fault driver’s insurance company to pay for the damages to the injured party in an accident. With this system applied, companies would pay the costs according to each party’s level of fault. Sometimes when drivers and their insurers disagree, the latter may have to file suit for uncompensated economic damages (lost wages, medical expenses) and non-economic damages (physical pain, emotional trauma) . Twenty-five percent of the US states maintain fault-based, or “tort-liability”, policy schemes in its road laws.

Also, fault-based policies could be made comprehensive and the coverage would include and pay for damages other than accidents, such as: vandalism, theft, or natural calamities. There are other optional coverages that drivers could avail that lets the company cover for the uninsured or underinsured driver, damages caused by collisions, and medical expenses for oneself or passengers.

No fault-based policies have the costs paid regardless of who is found to be at fault in an accident, meaning that both parties and their insurance companies have to pay for the damages. Because of this, there is no need to prove who is at fault in the accident. Also, the injured party could not sue the driver at fault for pain and suffering, emotional distress and inconvenience. But they could sue if the claim exceeds either a monetary or verbal threshold. Some drivers and motorists tend to be confused about the policy at first due to its name, and often misunderstand its meaning.

As of now, the no-fault policy states include the following: Florida, Hawaii, Kansas, Kentucky, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Pennsylvania, and Utah. These states had changed their systems to applying no-fault policies because the lawsuit system tends to make long and costly courtroom cases between the involved drivers. In these states, the no-fault portion of one’s AUTO insurance policy is usually called Personal Injury projection (PIP).

Given this information, knowing better the benefits that you can get from your insurance policy will surely become easier.