You may have come across the term no-fault when it comes to insurance, and this is just one of the many terms you need to know in order to understand the ins and outs of claims.
The basic premise is that, when someone has a motor accident, they can make a claim regardless of who is deemed to be at fault. You can get no-fault insurance policies as well as no-fault states.
In the US, there are 12 states that are known as no-fault states. The other states, including Texas, still use an at-fault system. In alphabetical order, the no-fault states are:
- New Jersey
- New York
- North Dakota
Puerto Rico also has no-fault laws, although it is a territory rather than a state. The Canadian provinces that fully follow this system are British Columbia, New Brunswick, Nova Scotia, Prince Edward Island and Quebec, while Ontario’s insurance system is a combination of no-fault and at-fault liability. Drivers living in Saskatchewan can opt out of the no-fault system if they want to.
No-fault status can change at any time if a state passes laws to repeal it. This has happened with various states throughout the mid-late 70s, which means that no-fault laws are not set in stone; some current at-fault states may even become no-fault states in the future.
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What Is A No-Fault State?
A no-fault state is one that requires all its citizens to be covered by no-fault insurance policies. The minimum amount of coverage needed varies according to the individual state in question – it is best that you look up the law in your own state so you can be sure you have all the necessary information.
Minimums apply to personal injury protection (PIP), bodily injury liability insurance and property damage liability insurance.
In these states, insurance covers each driver’s own injuries instead of paying out on behalf of whichever party caused the accident. Each person involved files a separate claim through their personal insurance, which is the purpose of the personal injury protection part.
No responsibility is assigned by the state for the accident in regards to your own injuries.; however, this does not mean that there was nobody to blame in the accident in reality.
Your policy must also cover you for property damage and injuries that you have caused to other people – this covers the other party’s damaged possessions and their medical bills/treatment.
Some states on this list are generally no-fault, but make allowances for you to opt out and choose a standard at-fault policy if you wish. The states in question are Kentucky, New Jersey and Pennsylvania, so if you live in any of these, talk to your insurance provider to see what alternatives are available to you.
10 other states (Arkansas, Delaware, Maryland, New Hampshire, Oregon, South Dakota, Texas, Virginia, Washington and Wisconsin) allow you to add a no-fault option on to your policy if you ask for it.
People who choose this option are still at liberty to sue for pain and suffering, but also enjoy the same personal injury protection.
Why Are Some States No-Fault?
No-fault insurance helps reduce the number of lawsuits instigated or exaggerated unnecessarily, because there are limits on how you can sue someone in the wake of a crash. Such claims are settled outside of courts, which puts less strain on the state’s legal system – the main aim of switching to no-fault insurance is to decrease the cost of auto insurance for citizens.
Which Is Better: No-Fault Or At-Fault Insurance?
Both types of policy are valid options for providing insurance coverage. At-fault insurance is also called tort insurance, and has been the default in most places for many years. No-fault works better in certain places than others, and changes the perspective from which the payment is settled.
No-fault insurance means that accident claims are processed and payouts received by claimants more quickly, because you don’t need to waste time determining blame. It also results in fewer minor injury lawsuits.
On the other hand, claims will raise your insurance premium and make it hard for you to gain compensation equivalent to the suffering you’ve experienced.
This is because there are strict damage thresholds you have to meet before you can sue for your injuries. It can also be tricky to get your head around the different rules for each state, although you will also find this confusion with a lot of legal responsibilities.
At-fault (tort) insurance is the standard type of insurance and works on the principle that blame must be assigned in order to pay out con claims.
States that don’t have compulsory no-fault insurance will still require you to have coverage for bodily injury and property damage liability – this is true everywhere but New Hampshire. If someone has caused you injuries that they could or should have prevented, you have more scope to sue them with this type of policy so you can feel some sense of justice and closure.
Insurance companies pay out according to how much blame lies at the feet of each party, and sometimes claims can take months on end to process while the fault is determined.
History Of No-Fault States
Auto insurance was first made mandatory across the US in 1997, when automobiles started to be seen frequently on roads. At this point, all claims were based on assigning fault for each accident that happened to decide how much the policy would pay out.
This likely stemmed from the idea that plaintiffs must find proof that a defendant is at fault to assign liability, which is believed to have come about in the late 1800s and was seen as evidence that the US legal system was advancing morally.
As time went on, people noticed that they were also seeing traffic accidents more regularly, so an alternative insurance system was suggested. The hope was that victims would have a much easier way of receiving the compensation they were entitled to.
Massachusetts was the first state to enact a no-fault law in 1971. Other states followed suit, and soon such proposals became a hot topic of debate in many places. At first, people saw the no-fault stance as being overall a positive move.
However, after a few years of seeing it in effect, they realized the costs weren’t being lowered by the change as much as they had hoped. Some states, including Connecticut, Nevada and Georgia, instated the law briefly and then repealed it again afterwards, and they have remained at-fault states since.
Currently, there seems to be stability in terms of which states are no-fault and which are at-fault, with no plans to change either way in the foreseeable future. All states have found what works best for their citizens, so keeping things the way they are makes the most sense.
Common Misconceptions About No-Fault Insurance
Having a no-fault policy does not absolve anyone of blame for any accidents that happen. After all, accidents, particularly involving more than one vehicle, must have been caused by someone.
It could be that both parties are at fault in some way – either 50/50 or a different split such as 30/70 – or maybe there was some external factor that influenced events.
While natural hazards such as fallen trees or adverse weather can occur, there will still be one party who instigated the collision (e.g. by braking sharply or swerving), even if they couldn’t have taken any other measures to avoid it.
Some people, albeit with good reason, will assume that having a no-fault policy means that they can’t be held responsible if they cause a crash.
What it actually means is that innocent parties don’t lose money while waiting for their claim to process so they can be reimbursed. You can still be sued for pain and suffering or financial losses in certain states if you were truly at fault.
12 of the states in the USA currently operate under a no-fault system. Other places have hybrid systems or allow you to opt in or out. If you live in a place that has no-fault laws, it is up to you to familiarize yourself with the regulations and organize your insurance policy accordingly.
Your insurance provider should be happy to go through everything with you, so you can always ask them questions if you are unsure. Remember: even with a no-fault policy you can still be found at fault for any collisions you have, and you are not protected from being sued.
Make sure you concentrate fully on the road at all times to minimize your risk of having a collision.