The definition of no-fault varies from state to state that chooses to be a no-fault auto insurance state. the term “no fault” refers to the fact that you do not need to prove who was at fault to receive compensation from your insurance company.
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This means that someone else’s negligence will not prevent you from getting help with medical bills or damage to your car if the other driver is at fault in an accident. let’s know which are the no-fault auto insurance states and which states use the tort system.
what is no-fault insurance?
No-fault insurance, sometimes also called personal injury protection insurance, covers medical expenses and lost earnings for you and your passengers, after your deductible and up to your policy limits, regardless of who has blame for a car accident.
This type of coverage is different from other types of auto insurance (liability insurance and collision insurance) because you file a claim with your own insurance company no matter who caused the accident.
Liability and collision insurance pays for damages depending on who is responsible for the accident. Also, it’s important to know that no-fault insurance is not required in every state.
list of states without failure
Most states use a tort system, but currently 12 states and Puerto Rico have a true no-fault insurance system that restricts the right to sue.
These states, where personal injury protection insurance is required, are:
- new jersey
- new york
- north dakota
who pays for damages in a no-fault state?
Under a no-fault insurance system, when you have an accident, your auto insurance provider automatically pays certain damages, regardless of fault, up to a specified limit. this is in contrast to a liability insurance system, in which someone is found to be at fault for a car accident, even if the fault is found to be 50/50.
what does a failsafe status designation mean and how does it work?
Let’s look at an example to clarify things a bit. Suppose he had a minor accident with another driver, we’ll call him Tom. Tom ran a stop sign and crashed into your car. he sustained injuries that came with $8,000 in medical bills. Under a no-fault system, he would file a claim with his own insurance company, which would pay him even though the accident was entirely Tom’s fault.
In a tort state, you would (or your insurance company would) file a claim with Tom’s insurance company to cover your medical costs since the accident was entirely Tom’s fault. however, if you were found to be partially at fault, say 30 percent of the accident was your fault, the payout (from tom’s insurers) would be reduced by 30 percent, which would be covered by your insurance company. /p>
if tom was uninsured or you (or your insurer) are not happy with the payment, you can sue him. In a true no-fault state, you would have to meet a certain threshold to sue, and in most no-fault states, this type of accident would not meet that threshold.
This is a basic explanation of how a no-fault status works compared to a tort status, but there may be other systems in place, it all depends on where you call home.
no-fault insurance explained compared to others
There are a few different versions of auto insurance, and the state you live in will determine what type of program you have.
Here is a quick overview of the various types of auto insurance systems:
This car insurance system is designed to reduce the cost of car insurance by eliminating the ability to sue. When an accident occurs, each person involved in the accident is compensated by their own insurance company for minor injuries, regardless of who was at fault. Neither driver can sue the other unless their injuries are serious and meet a certain threshold.
Complicating matters further is the fact that there are also different versions of no-fault insurance and different thresholds that vary by state. the conditions that must be met before a driver can sue is known as the tort threshold and can be verbal terms like severe disfigurement or death or it can be a monetary threshold, which kicks in when medical bills exceed a specified dollar amount .
In true no-fault states, every driver on the road must have a personal injury protection (PIP) policy. The coverage provided by a PIP will vary by state, but in most it should cover medical expenses, lost wages, funeral costs, and other out-of-pocket expenses. the main difference between states is the dollar limits of the various coverages.
It should be noted that no-fault insurance refers to injuries and medical bills. If your car was damaged in an accident, it means the other driver was at fault and you were not at fault, the cost of repairing your vehicle would fall on the at-fault driver’s insurance policy.
choice without guilt
In these states, drivers have a choice between a no-fault auto insurance policy and the more traditional tort policy. only three states currently have a no-fault election system. new jersey and pennsylvania have a verbal threshold for no-fault claims and kentucky has a monetary threshold.
This is a more traditional system and there are no restrictions on claims. If you are at fault in a car accident, the other driver or any of your passengers can sue you for both medical costs and pain and suffering.
additional pip coverage
In these states, drivers can have a pip policy and be covered by their own insurance company, but there are no restrictions on claims. these are not considered true no-fault states as they lack restrictions on claims.
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In these states, pip coverage may not be mandatory and the benefits provided may not be as robust as in a true no-fault state. arkansas, delaware, washington d.c., maryland, new hampshire, and oregon are currently additional states.
what is a state without fault?
You’ll see in the table below, 12 true no-fault states, as well as the other five states that are no-fault states but still require pip coverage, and the five states that are no-fault and offer optional coverage.
*note: the district of columbia is not a true no fault no fault state. Drivers are offered a choice of no-fault or fault-based coverage, but in the event of an accident, a driver who originally elected no-fault benefits has 60 days to decide whether to receive those benefits or file a claim against the other party .
*source: American Association of Property Damage Insurers; insurance information institute
According to the insurance information institute, these states had no-fault laws, but repealed them:
- nevada: effective 1974; repealed in 1980
- georgia: from 1975; repealed in 1991
- connecticut: as of January 1, 1973; repealed in 1993
- colorado: effective April 1974, repealed July 2003
- if you cause an accident in michigan in which someone is killed, seriously injured, or permanently disfigured
- if you are involved in an accident in michigan with a non-resident who is an occupant of a motor vehicle not registered in michigan
- if you are involved in an accident in another state
- You can be sued for up to $1,000 if you are 50% or more at fault in an accident, causing damage to someone else’s car, that is not covered by insurance.
- up to $20,000 for a person injured or killed in an accident
- up to $40,000 for each accident if multiple people are injured or killed
- up to $10,000 for property damage in another state
- $4,500 per person for necessary medical expenses for the accident
- $900/month (for up to one year) for disability/lost income due to accident
- $25/day for home services -house cleaning, etc.
- $2,000 for funeral, burial or cremation expenses
- $4,500 for rehabilitation expenses
- permanent disfigurement
- weight-bearing bone fracture
- compound, compressed, or displaced fracture of any bone
- permanent injury
- permanent loss of a bodily function.
- significant and permanent loss of a major bodily function
- permanent injury within a reasonable degree of medical probability
- significant and permanent scarring or disfigurement
Even between these states, program details can vary dramatically. Let’s take a quick look at a couple of different states to see how their programs vary.
michigan, for years, had one of the most comprehensive no-fault auto insurance systems in the united states. It also has the most expensive car insurance in the country.
michigan has the most expensive auto insurance in the country, according to carinsurance.com’s rate analysis. Michigan’s average annual premium, for full coverage, is $3,141, almost $1,400 more than the national average of $1,758.
how does no fault insurance work in michigan?
There are three parts to a michigan no-fault policy that every driver must carry. Many refer to this basic coverage as public liability and property damage, or PLPD. The three parts of Michigan’s no-fault policy are:
personal injury protection (pip):
If you are injured in a car accident, Personal Injury Protection, part of the no-fault policy, will pay all of your necessary medical bills with no maximum limit. (until the reform laws take effect in July). it also covers up to 85% of lost income for up to three years.
This number is reviewed annually and as of October 2018, the monthly maximum is $5,700 per month. Injured parties are also entitled to $20 per day for replacement services if they are unable to provide them to their family, this includes things like yard work or cleaning.
property protection (ppi):
This coverage will pay up to $1 million for damage your car causes to other people’s property. this can include things like fences, mailboxes, buildings, and even landscaping. will cover damage to a vehicle if that vehicle was parked at the time you hit it, it does not cover damage to cars you hit that were in motion.
residual liability insurance:
While Michigan’s no-fault law protects insured persons from being sued as a result of a car accident, there are some circumstances in which a driver can be sued.
According to the official michigan website, the following may result in a lawsuit:
A michigan no-fault auto insurance policy will pay for the following if you are in any of the situations described above:
It should be noted that these are the state required minimums and most drivers increase their coverage levels. if the damages exceed the coverage levels of your policy, you are pending for the remaining damages.
the big difference between michigan and other non-failure states is the boundaries. Most no-fault states put a cap on the PIP amount, but Michigan, until recent changes to its auto insurance laws, guaranteed unlimited lifetime medical benefits to car accident victims. this generous benefit is supported by an annual fee of $220 (per vehicle) paid by all drivers.
reform comes to michigan
While a recent auto law reform is underway that will eliminate mandatory lifetime medical payments, it’s too early to tell how much this will reduce rates for Michigan drivers.
From 2008 to 2017, the severity or costs of pip claims increased 30%, according to the Insurance Research Council. michigan led the way for states with higher-than-average pip cost increases for that time period – an increase of 60%.
However, under new laws, starting in July 2020, you will be able to waive personal protection benefits entirely if you have health insurance, such as an employer plan or Medicare. other options will include staying with unlimited coverage or choosing a value of $250,000 or $500,000. therefore, the lower rates should apply at some point for michigan drivers.
This no-fault state pays much less than Michigan for injuries under its no-fault policies, which may be why its premiums are so much more affordable. According to data from carinsurance.com, average auto insurance in Kansas is $1,689, about $70 less than the national average.
here are some details of his program:
kansas pip minimums:
Like other no-fault states, you can sue if you meet specific thresholds. the thresholds in kansas are:
You have exceeded your pip coverage for your medical expenses and your injuries qualify as “serious”. In Kansas, “serious injuries” are defined as follows:
no-fault insurance doesn’t always work
Between 1971 and 1976, two dozen states adopted no-fault auto insurance laws. four decades later, rising medical costs and rampant fraud have made the system a persistent target for reform. No-fault insurance schemes can be expensive (think Michigan) and often lead to fraud (think Florida), which ends up driving up costs for everyone.
High costs can seriously affect no-fault auto insurance. In Michigan, unlimited lifetime medical benefits for accident victims meant the state had the highest average auto insurance rates in the country for years. But, now that the reform laws have been passed, which will go into effect in July of this year, drivers in that state are hoping to get some relief from super-high car insurance costs.
While the intentions of a no-fault system are good (lower costs, fast claims payout), it can be difficult to set up a well-oiled system.
“A well-functioning no-fault system is a good auto insurance option for states,” says James Whittle, deputy general counsel for the American Insurance Association, a trade organization. but he admits that a well-functioning no-fault system is a challenge. “We realize that is less and less the case.”
florida is a prime example of how an outdated pip system has raised insurance costs and spawned massive fraud. Florida has the third most expensive auto insurance in the country with an average premium of $2,050. this is 50% more expensive than the national average.
florida requires all drivers to have $10,000 pip insurance, an amount that hasn’t increased since 1972. a recent sun sentinel article noted that the $10,000 limit is worth $1,500 in 2018 dollars and would need to be increased to $66,000 to buy the same amount of treatment you bought in 1979.
Florida’s threshold to sue is verbal and includes the following:
Unfortunately, $10,000 is rarely enough to cover medical bills for even a moderate accident, so accident victims try to prove their injuries are permanent in order to sue.
While Florida has set a 14-day limit on seeking treatment after an accident and instituted a $2,500 benefit cap, unless a physician, physician of osteopath, dentist, or supervised physician assistant or advanced nurse practitioner determine that the injured person has an “emergency medical condition” in 2013, premiums have continued to rise.
Floridians pay an additional $1 billion per year due to inflated premiums from personal injury protection fraud, according to a December report from the state office of the insurance consumer ombudsman.
florida and michigan have certainly paid the price (very high premiums) for no-fault insurance, but not all no-fault states suffer the same consequences. Auto insurance rates in no-fault states like North Dakota and Minnesota are consistently lower than average.
some states have gotten rid of your insurance through no fault
florida is currently considering repealing the pip law, but passage is far from guaranteed. Florida lawmakers have been considering changes to the system for years, but new legislation never seems to pass. The Sunshine State isn’t the only state interested in repealing its no-fault insurance plans, many states have already gone that route.
While states struggling with high auto insurance costs try to fix their laws at no fault, states that have repealed them entirely have seen their premiums drop.
colorado let its no-fault law lapse in 2003 because “governor bill owens wasn’t happy with it,” says marianne goodland, a spokeswoman for the colorado division of insurance.
By 2008, premiums had plummeted 35%, a state consultant found. that translated to a savings of $322 per vehicle per year. prices have held steady, and according to rate data from carinsurance.com, the average premium in colorado is now $1,948, which is slightly above the national average but well below what auto insurance costs in michigan .
colorado replaced its no-fault law with a more traditional tort system that requires motorists to purchase liability insurance coverage that pays if they injure another person or cause property damage. motorists must have at least $25,000 of bodily injury liability coverage per person, per accident; $50,000 for all injuries in one accident; and $15,000 of property damage liability coverage.
Medical payments coverage is also automatically added to Colorado policies, although motorists can opt out. This insurance covers the first $5,000 of medical expenses caused by a car accident. goodland says motorists tend to opt out if their health insurance coverage meets that need.
a report by the non-profit organization rand corp. He found that in Georgia, which repealed its no-fault law in 1991, liability premiums fell almost immediately by 20 percent and remained constant. In Connecticut, which repealed the no-fault system in 1994, the drop was steeper, with liability rates falling about 31% in 2004.