No-Fault and At-Fault Car Insurance Laws: What’s the Difference?

How well do you understand your insurance policy? Did you have a comprehensive look while purchasing or chose to go with the insurer’s suggestions? According to a nationwide survey, more than half of Americans do not understand much about insurance.

Here, we’ll provide comprehensive answers to one of the common questions about car insurance; what are the differences between no-fault and at-fault insurance laws? 

When a road accident occurs, the injured parties are eligible for compensation depending on several factors. One of the main elements to consider is whether you live in a no-fault or at-fault state.

No-Fault Insurance Laws

Also known as personal injury protection (PIP), no-fault insurance means exactly what it sounds like. The policy compensates car accident victims regardless of whether they were at-fault. 

Some states have adopted this system in their car accident laws too. In a no-fault state, the drivers involved in an accident receive coverage for injuries and other damages without considering who was negligent. This hastens the compensation process and avoids issues like delayed payments to healthcare providers.

However, it does not absolve the party at-fault for their negligence. Insurance companies might still conduct an independent investigation and hike premiums for the negligent party. 

No-fault insurance covers things like medical bills, household services, death benefits, and lost wages, but excludes non-economic damages like pain or suffering.    

Advantages

  • No-fault insurance does away with the painfully long process of investigating fault, assigning liability, and negotiating compensation amounts. It reduces delays that some insurance companies intentionally apply on negligence-based lawsuits to avoid paying out.  
  • Accident victims save a lot of money that could have been paid as legal costs and police report fees.
  • Ensures that parties without personal health insurance still get the medical attention required to treat accident injuries.
  • Premium rates might be significantly lower because insurance companies do not fight to ascertain liability.

Disadvantages

  • Unfortunately, no-fault insurance does not cover damages like pain, suffering, or emotional stress caused by an accident. To receive full compensation, the victim has to file a separate lawsuit against the negligent driver but there’s no guarantee that it will be accepted.
  • There’s also concern that drivers in no-fault states might fail to grasp the repercussions of distraction or other forms of negligence that cause accidents since there’s no compensation required from them.

At-Fault Insurance Laws

All the other states apply an at-fault car insurance system. Here, the driver whose negligence caused an accident pays for both their damages and those of the other driver. This insurance will also cover any passengers onboard all vehicles involved.

In some of these states, such as Florida, drivers are still required to carry an additional PIP cover that works the same as no-fault insurance. The only difference is that the negligent driver will still be held liable and required to compensate the injured party.

There are two variations of at-fault insurance laws and the ones that apply to you will depend on your home state.

In contributory negligence, the injured victim does not receive any amount of compensation if determined that they contributed to the accident in any way.

On the other hand, comparative negligence assigns each party their percentage of fault. Parties then receive a compensation amount that is less their contribution. In some states, a victim will not receive any compensation if their negligence surpasses 50%.

Advantages

  • The responsible party bears the brunt of compensating all the damages. This can go a long way in deterring other people from violating traffic laws. 
  • At-fault insurance compensates the victim for both economic and non-economic damages too, so that the injured party does not have to initiate other legal processes for the same accident. 

Disadvantages 

  • Contributory negligence laws practiced in some states may seem unfair because they deprive injured victims of their rightful compensation, even at a 1% fault. 

All opinions expressed on USDR are those of the author and not necessarily those of US Daily Review.