What is no fault insurance?

Answer 1

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No Fault insurance in its pure form means that your insurance coverage provides coverage for a risk regardless of who is At Fault for every covered loss. There are only approximately a dozen states which have applied No Fault insurance coverage. Alternatively, the rest of the states in U.S. use the tort' liability system where financial recovery from a loss is based on the extent of provable negligence.

In the U.S. however, no-fault' insurance coverage is really a hybrid variation. This means that the extent of financial recovery is limited and generally only applies to first party medical coverage.

Coverage does not usually extend to either liability and property damage. Some people are under the misconception that when the other driver is responsible for the accident then your car will automatically be covered in a state that has No Fault insurance, and this is simply not the case. Most U.S. states limit the extent of recovery which does not extend to all insurable risks under your auto policy.

Essentially, No Fault insurance will cover the medical coverage only and to the legal limits stipulated under individual state law. So, if you have an accident in one of these states, and regardless of who was at fault for the accident, your own insurance company must pay the specified portion of medical coverage and bills.

More importantly, if you are insured in a No Fault state the issue of who is responsible and liable for the accident may still apply. Just because you have No Fault doesn't mean you're off the hook. If you are responsible for causing the accident, you may also be responsible for the other person's property damage and pain and suffering if they are injured.

One misconception about No Fault insurance is that some people fear that their premiums will increase when their insurer pays out medical costs. They fear this possibility especially if they weren't responsible for the accident in the first place. This is not the case. No Fault insurance is very similar to Workers Compensation in that payment of the covered medical costs must be paid by each respective insurer for those involved in accident.

So what happens when a person who has No Fault insurance gets into an accident in a state that has the tort liability system or visa versa? Simply put, the laws of the state where the accident occurs apply.

Answer 2

no