no-fault car insurance
What no-fault car insurance covers
No-fault insurance is designed to promptly pay personal injury claims and lower potential litigation costs. No-fault insurance often includes or requires personal injury protection (PIP) coverage, which can pay for each insured's medical care (and more) after an accident, regardless of fault.
Where no-fault coverage is optional, you can select it when you buy your policy or before you start your next term.
Let's take a look at what no-fault insurance coverage entails, what it does well, and why it's considered controversial in certain states.
How no-fault car insurance works
Two cars in New York collide. Both drivers need medical care, so an ambulance arrives and rushes them to a nearby hospital. Soon after, the drivers file claims with their respective insurers. In a no-fault state like New York, each insurer is required to pay personal injury and related loss-of-wages claims filed by their policyholders — regardless of who caused the accident.
A no-fault insurance policy with PIP coverage can help cover the insured driver's medical expenses, rehabilitation expenses, loss of wages, and funeral expenses up to the limits you select. If you live in a no-fault state, check the specifics of your policy's personal injury protection coverage to better understand what your policy covers.
Some states that use the traditional (fault-based) insurance system still require PIP coverage unless it's declined in writing.
What no-fault car insurance doesn't cover
No-fault insurance doesn't apply to property damage. That means you can still be held liable for property damage claims, so it's a good idea to have property damage liability coverage on your policy.
If your own car's damaged in a crash, your policy's collision coverage (which is optional unless required by a loan or finance company) will step in to fix your car.
No-fault coverage doesn't prevent lawsuits entirely. While drivers involved in an accident can still sue another driver, no-fault laws do place restrictions on when a suit can be brought. These restrictions vary widely by state, but lawsuits can typically be filed if the at-fault driver caused serious injury or death in the collision, or if medical expenses exceed a state-defined threshold.
Less fault, more fraud?
Critics of no-fault car insurance point to increased fraud as a primary downside of the system. Because no-fault insurance makes it easier for drivers to receive claims payment for medical expenses, scammers stage accidents, fake injuries, inflate medical costs, and collect the payout. The downside for the honest driver is that higher claims frequency in a given territory can lead to increased rates from car insurers.
Proponents of the system argue that car accidents happen, and drivers should be able to receive prompt medical care whether they're at fault or not. Supporters also point out that fewer lawsuits and their related expenses translate to lower expenses for the insurance industry. And these lower expenses allow insurers to offer lower rates.
Live in an optional state?
No-fault insurance provides peace of mind because your injury claims will be paid quickly, regardless of fault. Weigh the pros and cons before deciding whether you want the coverage on your policy.
It's a complicated topic. If you'd like some expert advice, give us a call at 1-800-ESURANCE (1-800-378-7262) anytime. We're always here to help.
Personal injury protection (PIP)
Read up on the coverage that helps pay for medical expenses in no-fault states.
Myth: claims always increase car insurance rates
Learn why this isn't necessarily the case.
Car insurance fraud
Get an overview of car insurance fraud and see why it impacts all drivers.