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Overview
"No-fault" refers to any state's automobile insurance program that has policyholders recover from their own insurance companies after an automobile accident, regardless of which party was at fault. Currently, the District of Columbia and 12 states have adopted some form of no-fault laws governing automobile insurance. The states are Florida, Kentucky, Kansas, Hawaii, Michigan, Massachusetts, New Jersey, Minnesota, New York, Pennsylvania, Utah and North Dakota. Policyholders must buy coverage known as personal injury protection, or PIP.
History
The concept of no-fault insurance first surfaced in Canada in 1947. Supporters felt that no-fault coverage resulted in faster settlement of claims, and the premiums for such coverage were lower because legal fees and court costs would be much lower. However, lawyers tended to oppose the no-fault concept because it posed a limitation on the individual's right to sue for damages. The concept of no-fault automobile insurance first appeared in the U.S. in 1971 when Massachusetts passed no-fault legislation. Since then, because of rapidly rising rates, many states are revisiting the concept.
Significance
In states that have not passed no-fault legislation, a driver who is not negligent must sue the insurance company of the person responsible for the accident if he was injured. In no-fault states, that language does not appear, and the PIP coverage of the injured person pays for damages, whether caused by him or not. To confuse the issue further, because no-fault states have varying opinions of the law's right to infringe on a person's right to sue, each state has its own proprietary language that is different from one to the next.
Features
In addition to covering the cost of medical care resulting from the accident, most PIP policies will also pay you a percentage of wages lost in recovery as well as other routine expenses like property maintenance and mileage to and from doctor appointments. This coverage exceeds what insurance companies are expected to pay in non-no-fault states, and the policyholder pays increased premiums for it.
Considerations
In addition to PIP coverage, you must purchase property damage liability insurance if you live in a no-fault state. That covers the other driver's automobile in the accident, not damage to your car. In addition, you should buy collision coverage for your car along with insurance for expenses incurred by someone riding with the other driver. Because of these added coverages, people living in no-fault states tend to pay more for their automobile insurance.
Warning
Each no-fault state has its own set of automobile insurance laws and amounts of coverage needed by its drivers. Be sure that your automobile insurance needs are being met by someone familiar with the specifics of your state's laws and requirements.
