The Basics of No Fault Auto Insurance

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Most insurance policies operate on a fault based basis, which means that the majority of the costs of the accident are borne by the company that insures that driver who was determined to be at fault. Of course, determining who is “at fault” is rarely straight forward, and can become mired in court for months or years. During this time, the insurance company is unable to make payments. Since most insurance companies have a roughly equal number of clients that are at fault to those who are not at fault, it makes sense to remove the concept of fault from the equation all together. This is where no fault auto insurance comes into play.

No fault auto insurance is a car insurance policy that pays for damage to the client’s vehicle, any applicable medical bills, and other expenses when the insured is in an accident regardless of who is at fault. By accepting the terms of a no fault auto insurance policy, the insured gives up all right to sue the at fault party for damages.

No fault auto insurance really requires a legislative environment that enforces the stipulation that the insured can not sue for damages. Some states have implemented no fault insurance policy statutes, but for those who do not live in these states, no fault auto insurance is not likely to be a good choice.

Before purchasing no fault auto insurance, you should consider whether or not you live in a state that supports no fault auto insurance policies. If your state does not support such policies, then you should be aware that you are likely to be sued by the other party if you are determined to be at fault and are not protected by the lawsuit blanket that those who are in no fault auto insurance states enjoy.