A Look at No Fault Insurance

No-fault insurance is a type of insurance that is used in certain states that does not seek out the fault of either party involved in an accident. This type of insurance is used in several areas and is very different from traditional forms of auto insurance. When a state requires no-fault insurance, drivers that are involved in an accident are going to be covered only by their insurance company. Regardless of who is at fault in the accident, each person will go to their insurance company for reimbursement for damages. Even if someone in the accident is clearly in the wrong, they cannot come back on the other person in an attempt to collect damages.

Purpose

This type of insurance was created in order to cut down on expensive litigation costs and excessive damage settlements. With other states, many times, parties that are involved in an accident will go through litigation that can take months. One individual might sue the other, and both parties will have to hire lawyers. The person who is at fault will have to potentially pay much more money than they had in a settlement. By using no-fault insurance, this problem can be completely avoided. Lawsuits will not be allowed and everyone will know that they are going to be dealing with their own insurance company, regardless of what happens.

Premiums

Many consumers like this type of insurance because it allows them to get lower insurance premiums. Insurance companies that use this insurance model do not have to pay the large claims that are often paid in other states. Because of this, the insurance companies can afford to lower the cost of insurance premiums. This makes everything much more affordable and allows consumers to have more expendable income every month.

Critics

Even though this type of insurance has some documented benefits, there are those that are not convinced of its effectiveness. Many critics believe that this type of insurance does not punish negligent drivers enough. Since everyone will be able to avoid a large lawsuit in the event of negligent driving, there is not a sufficient punishment for engaging in it. You may have to pay slightly higher insurance premiums, or have a high risk rating attached to your name, but that is the extent of the punishment. With traditional auto insurance, negligent drivers are hit with large lawsuits that teach them a lesson about driving negligently.

Exceptions

Even though in most cases, individuals are not allowed to file lawsuits as a result of an accident, in some cases, they can. In order to file a lawsuit against another individual in a no-fault system, you must have sustained extensive injuries. For example, if you become paralyzed, lose a limb, or become disabled in some capacity, you could potentially sue for over and above what the insurance company pays.

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