The purpose of no-fault laws is to provide basic medical coverage for people injured in car accidents. Often, attempts to sort out who is liable for an accident can drag out while insurers gather information and negotiate liability. This has sometimes left victims unable to get the treatment they need, or left doctors unable to recover their fees.
As a remedy, many states have adopted laws specifying that auto insurers doing business in that state must provide certain coverages for medical costs arising from automobile accidents, regardless of who is at fault. Such "no-fault" insurance ensures there is at least some coverage available right away for occupants of vehicles and pedestrians if struck by a vehicle.
The costs covered usually include medical bills, lost wages and, to some extent, Replacement Services. Replacement Services are the cost to pay someone else to do something you would normally do yourself if you weren’t hurt. Baby-sitter expenses for a stay-at-home mother would be an example.
What no-fault insurance does not do:
It does not replace Health Insurance. If you are injured in a car accident, you can still use your private health insurance. In some states, no-fault insurance will pick up what the health insurance will not pay for, such as co-pays and fees not covered by the plan.
It is also not a free ticket for the person who caused the accident. If there is an accident, the insurers of the vehicles involved will make a liability determination. Even if the at-fault driver does not have auto insurance, the company that pays the no-fault benefits (and the Health Insurer) can recover their losses from that person.
No-fault insurance is not physical damage insurance. It has no effect on claims for damages to the vehicles involved. If you live in a no-fault state and damage another person’s property with your car, you are still held liable and the claims process moves along as it always has.
It is not a means to provide coverage for all damages to all parties in an accident. If you cause an accident and don’t have collision coverage on your car, you will not be able to recover from the insurer of one of the other vehicles involved. You will pay for your own damages and your premiums will probably still go up.
It also does not pay for pain and suffering, loss of consortium and other injury-related issues. Nor does it take the place of uninsured or under-insured motorist coverage.
While no-fault has sometimes been touted as a panacea for all accident-related problems, it is actually a fairly limited plan that deals only with very specific issues. As with all insurance-related issues, no-fault coverage varies according to the state in which each vehicle is registered and insured. If you have questions about no-fault in your state, contact your local agent or insurance company.
Does your state have no-fault?
