No-Fault Insurance: What is it, and How Does it Work?

Posted: Jun 26, 2017

You have probably read about no-fault insurance before, but do you understand what it does? Knowing what no-fault insurance will—and will not—do for you is an important part of being able to determine how it can fit into your insurance coverage scheme. Here are some of the more common questions regarding no-fault insurance.

What Does No-Fault Insurance Do?

No-fault insurance provides coverage for the medical bills that can arise out of a vehicle collision. This is true whether it’s a one-vehicle collision, a multiple vehicle incident, or something in between. Further, no-fault insurance—as the name implies—can be relied on to pay out regardless of who is at fault.

Traditional liability insurance would cover the medical (and possibly other) expenses of parties when the person who carries the insurance is the one at fault in the accident. This would be a great arrangement if it could be established that everyone carried liability insurance. However, the sad reality is that many drivers do not carry liability insurance—even where it is required by law—meaning that if they cause an accident, the parties who are injured could be on the hook for their own medical expenses.

No fault insurance is a way to protect against this possibility. If you carry an insurance policy with no-fault coverage, you would make a claim against that policy in the event you are injured in an accident. This is true regardless of who is at fault in the accident. Because you will be collecting from your own insurance company, you may be limited in your ability to pursue someone else for your damages—even if that other person is the one who caused the accident.

What Is The Advantage Of No-Fault Insurance?

A key aspect of no-fault insurance is that it eliminates lengthy and costly litigation. If an accident takes place, each insured claims against his or her policy, regardless of who is at fault. This works to avoid court cases trying to establish the fault of someone else, as fault becomes irrelevant to recovery.

Does No-Fault Insurance Completely Eliminate My Ability To Sue?

Laws vary from state to state; however, generally speaking, you may still pursue the person who is at fault in the accident if you meet certain requirements. The requirements will vary depending on your state, so ask your insurance agent for more information on this.

Does No-Fault Insurance Replace Uninsured Or Underinsured Driver Coverage?

No. Even with no-fault insurance, there are still key advantages to having an uninsured driver (or underinsured driver) policy. These extra layers of protection can help ensure that you are adequately covered and that you are able to continue to meet your financial obligations following an accident.

Remember that in some states no-fault insurance will only pay out for medical expenses. In such a state, you would need to make sure your policy covers things such as lost wages, pain and suffering, and other matters.

If you would like more information, contact us at Highmark Insurance today!