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Ultimate Guide to No-Fault Auto Insurance
People often believe that no-fault laws literally mean no assignment of fault in an accident. Actually, no-fault laws outline how personal injury claims are handled in a no-fault state. Our brief guide will shed light on what is no-fault insurance, its purpose, and use.
What is It?
No-fault insurance is medical coverage, in the form of Personal Injury Protection (PIP), that helps pay for medical expenses, regardless of fault, for the occupants of your vehicle following an auto accident.
No-fault insurance is state mandated and each state that requires no-fault coverage has a specific policy limit that can be payed towards medical expenses. In most cases, this limit is $10,000. Occasionally you may see limits that are lower than that, higher, or even unlimited.
Do No-Fault Laws Apply to You?
No-fault laws currently exist in Puerto Rico and 12 states: Florida, Hawaii, Kansas, Kentucky, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Pennsylvania, and Utah. While many practices that accompany no-fault laws are the same, each state’s laws can vary, so you should consult your insurance agent with any state specific questions.
The remainder of the states are tort states. This means that the injured party can go directly to the insurance carrier of the tort (the at-fault party) to recover money for medical expenses as well as pain and suffering. Unlike no-fault states, tort states do not place monetary or descriptive limitations on filing lawsuits resulting from personal injury.
PIP or Medical Payments (Med Pay or MP) coverage is often available for purchase in tort states but is not mandatory. The policyholder can choose to, or not to, use it.
New Jersey, Kentucky, and Pennsylvania are “choice” no-fault states because the policyholder has the option to reject the no-fault coverage. Although this option exists, no-fault laws often include stipulations to discourage rejection of no-fault coverage.
This discouragement can come in the form of making the injured party (who rejected the benefits) personally responsible for paying medical bills out of pocket, up to the same limit that would have otherwise been covered by the no-fault or PIP coverage.
It can also come in the form of removing the monetary or verbal threshold for filing lawsuits that is associated with the no-fault law. The removal of these thresholds can cause the insurance carrier to increase the premium that the policyholder pays for his Bodily Injury Liability (BI) coverage because he would be more likely to be exposed to litigation than an individual who accepts the no-fault coverage.
The Purpose for Having No-Fault Insurance
The premise behind this coverage is to provide a readily available pot of money, designated specifically for medical expenses following an auto loss, on each auto owner’s policy. This is to ensure that the occupants of the vehicle can have immediate access to medical care while the investigation is ongoing.
No-fault laws also help minimize lawsuits, which in turn help save money on how much consumers pay for insurance.
No-fault laws dictate a specific threshold that an injured party has to meet in order to be able to file suit. These thresholds can be verbal or monetary. A verbal threshold reflects a description of the severity of an injury that has to be sustained to file a lawsuit; no-fault laws explicitly outline those specifications. A monetary threshold dictates a specific dollar amount that the claim has to meet in order to file a lawsuit.
What Does No-Fault Insurance Cover?
No-fault insurance in its broadest form covers medical expenses inclusive of medical bills, prescriptions, medical equipment (TENS unit, crutches, etc.), lost wages, mileage to and from appointments, essential services (help with cleaning house, childcare, yard work if incapacitated), death benefits and funeral expenses.
State laws and the way insurance companies write their contracts within the parameters of those laws can vary, so it is best to check directly with your insurance carrier to verify what is covered on your auto policy.
Who Does No-Fault Insurance Cover?
No-fault insurance typically covers the policyholders, resident relatives, and any other occupants of your vehicle at the time of the accident. Resident relatives have to reside with the policyholders and be connected to the policyholders by blood, marriage, adoption, or as a ward. Some insurance contracts contain specific coverage exclusions for individuals who are not policyholders or resident relatives.
No-fault insurance often covers pedestrians and cyclists involved in motor vehicle accidents. Some states dictate that the no-fault insurance of the injured party has to pay for an injured pedestrian or cyclist. Other states dictate that the no-fault insurance of the at-fault vehicle driver has to pay for the injured pedestrian or cyclist.
Recent No-Fault Developments
Florida may no longer be a no-fault state come January 1, 2018. A new bill that recently passed a state House subcommittee aims to replace the no-fault law with increased minimum liability limit. The current minimum liability limit that Florida vehicle owners are required to carry to pay for injuries when at-fault is $10,000 per person up to $20,000 per accident. The new bill would increase these limits to $25,000 per person up to $50,000 per accident, in turn improving the monetary cushion available to injured parties when hit by an at-fault driver.
Where Do You Stand?
Your state department of insurance can provide the most accurate information about no-fault laws, just as your insurance agent can provide the most accurate policy information. Do not be afraid to utilize the resources around you to ask questions and learn. The more you know about your state laws and your insurance policy, the better prepared you can be for a future loss.