No Fault Insurance

No fault insurance is a term used to describe any car insurance system that requires you to carry auto insurance for your own protection. However, this insurance places certain limitations on your ability to sue others for damages.

Under no fault insurance laws, your auto insurer will pay for any damages that you incurred, depending on the limits of your policy, regardless of which party is to be faulted for the accident. Any other driver who is involved is covered by their car insurance policies.

What is No Fault Insurance?

If you purchase a pure no fault insurance system, you enjoy complete coverage by your own insurance policy. At the same time, you will be barred from suing other drivers for damages.

However, no US state implements a pure system. Instead, most states use parts of no faulty system as the standard liability insurance system. Under such set up, you will be responsible financially for any damages that you might cause. This is made possible with States permitting lawsuits in limited types of cases.

No fault insurance intends to lower premiums by avoiding costly lawsuits that may arise from any accident. At the same time, it provides fast payments for any personal injury or loss of property. The insurer of the victim will pay out any claim, with the insurer of the driver at fault ultimately settling all claims in the end. It will now charge the party at fault with a higher premium since he is considered of higher risk.

PIP Insurance (Personal Injury Protection)

Personal Injury Protection, or PIP insurance, is a part of car insurance that fully covers the medical expenses in case you and your passengers are injured in an accident. PIP insurance covers you as well as your passengers regardless of who is at fault. It is unlike liability insurance coverage, which is required in most US states and offers coverage to other parties provided you are the one responsible for the accident. PIP insurance is required in a few states.

The best thing about PIP insurance is that it you are able to avail immediately of medical attention without having to worry about expensive medical costs. Whether or not you are at fault for the accident, your insurance will pay for medical expenses, depending on the limit of your PIP insurance coverage.

In case, you do not possess PIP or health insurance covering car accidents, this means that you have to look for a medical or health provider that accepts any third-party claim. Otherwise, you will have to pay for your medical care out-of-pocket and simply ask for reimbursement from your insurance company or that of the other party. This depends on who is responsible for the accident.

If you possess reliable health insurance that fully covers car accidents, there is no need to obtain PIP coverage; or at least purchase only the required minimum amount. You must understand your personal insurance situation before making a wise decision about PIP insurance.

Which States Use PIP Insurance?

PIP Insurance is considered to be a mandatory insurance coverage in a number of US states. Coverage actually varies from one state to another, depending on what is covered as well as types of medical treatments that are considered reasonable. For instance, in the state of Utah, acupuncture is considered a normal medical treatment, but not in California. Some states permit PIP claims even when Workers’ Compensation claim already exists.

In some US states, PIP coverage is subrogable; this means that your insurer will pay for any incurred loss, regardless of insurance liability. You then recover; or in other words, subrogate what your insurer paid from the insurance company of the liable party. This leaves the insured or claimant in a favorable financial position, if only because his medical bills are paid, while leaving the insurance carriers to settle any financial issue.

Here is the list of States with required PIP insurance coverage:

  • Delaware
  • Hawaii
  • Kansas
  • Florida
  • Kentucky
  • Michigan
  • Massachusetts
  • Minnesota
  • New York
  • New Jersey
  • North Dakota
  • Pennsylvania
  • Oregon
  • Texas
  • Utah

What is ‘Choice No Fault’?

Choice no-fault plan allows insured drivers to choose whether his mandatory car insurance coverage is under the common tort liability system or a no-fault insurance compensation system. The latter restricts your ability to collect non-economic damages. Choice no fault insurance plan means that you have the sole decision as the car owner to obtain coverage under a no-fault insurance plan that is offered by the state.

A few US State consider choice no fault insurance as an optional plan. There are currently three states that allow “choice” no fault coverage; these are New Jersey, Pennsylvania, and Kentucky.