What is No Fault Insurance & How Does It Work?
Accidents and mishaps are commonplace affairs in the day to day life of the modern man. While there can be no doubt about the physical and mental trauma that the concerned individual suffers, the financial expenditures also form a large concern of the entire deal. In such a situation, insurance covers do aid a person in dealing with all the expenses to a great extent. The no fault insurance is one such insurance cover that allows people to get reimbursed in case of the accident regardless of the party at fault.
What is No Fault Insurance?
Simply put the no fault insurance refers to the insurance coverage plan wherein the insured is compensated for the losses that they have incurred regardless of whoever is at fault in the incident concerned. Also known as Personal Injury Protection, this claim allows a person to claim medical expenses and lost wages in case of automobile accidents under the no fault laws of the concerned state against the automobile insurer of the concerned person. The insurance agency is likely to pay for the medical expenditures and the lost wages to a certain limit, exceeding which the expenses are considered to be the responsibility of the insured.
Certain states have a two-fold medical expenditure system, according to which insured agencies have to pay part of the medical expenditure beyond the limit stated by the concerned person's health insurance. Whatever be the situation, the insured person is responsible for disbursement of their own medical bills once it exceeds the no fault limit of the state. In most of the states where the no fault laws are in place, the insured is not permitted to make any sort of claim against the driver in case of negligence unless the medical expenditure reaches a certain amount or the injured person is seriously affected.
The no fault insurance laws are in place in the states of Florida, New York, Utah, Kansas, Michigan, North Dakota, Hawaii, Massachusetts, Minnesota, Columbia and Puerto Rico as of 2016. The states of Pennsylvania, New Jersey and Kentucky provide the policyholders with the option of purchasing this type of insurance policy at scaled down premium rates.
How Does the No Fault Insurance Work?
The no fault insurance system works by taking into account the associated expenses irrespective of who is at fault in the concerned incident. However, the coverage works only up to a certain limit, exceeding which it is the insured person's responsibility to deal with the expenses.
The state has fixed separate no fault limits for medical expenses for people with and without health insurance coverage and is supposed to pay a certain portion of the insured person's lost income. In such situations, if the insured individual's expenses go above the rates fixed by the state laws, then the no fault insurance provider is responsible for paying the amount of the bill specified by the no fault laws of the state. The rest of the bill is the responsibility of the insured person.
No Fault Insurance – Areas Covered and Uncovered:
Before filing for a no fault insurance cover or the Personal Injury Protection, it is mandatory for the insured to have a clear cut idea about the areas covered by the said insurance and the areas which are not covered by it.
The no fault insurance covers the following areas-
- The medical expenses of the concerned person and their passengers in case of an automobile accident.
- Associated expenses, like lost income, domestic and childcare services, loss of working ability for certain duration and the like are also covered.
However, it is important to note in this context that the lost income coverage varies from one state to another and is not necessarily a guaranteed cover. Hence, it is important for the insured to go through the scheme of coverage of the concerned policy before coming to a conclusion.
Along with the areas covered, it is also important to have a clear view of the areas that are not covered by the Personal Injury Protection.
- Damage Caused to the Property of Another Person: No fault insurance work is unlikely to include the expense for the damage caused to the property of another person due to the concerned insured. In such cases, the property damage liability might come for aid and help settle matters.
- Damage Caused to the Vehicle: No fault insurance also does not cover the damages caused to the automobile of the insured. The insured has to depend on the collision coverage for the purpose.
- Excessive Medical Expenditure: No fault insurance coverage has its limitations. Medical expenses and lost income is reimbursed only up to a certain extent. However, certain states do have exceptions to this rule and one can always file Personal Injury lawsuit to claim the excess amount.
Pros and Cons of the No Fault Insurance
All types of insurance coverage come packaged with their own set of pros and cons. The no fault insurance also is not an exception- it comes packaged with advantages and disadvantages of its own.
Pros of No Fault Insurance Cover
- The insured person does not need to be worried about suing the party responsible for the accident, especially in cases when the situation deals with people who are not covered by automobile insurance.
- The insurance policy is also likely to cover the bills and damages pertaining to the accident irrespective of the party responsible for the incident.
- The no fault insurance cover is also painless with the payments for all necessary claims being processed fast.
Along with the aforementioned merits, the no fault insurance cover comes along with certain demerits as well.
Cons of No Fault Insurance Cover:
- One of the chief demerits of the no fault insurance cover is that the person concerned cannot claim their own insurance even when they are not at fault.
- The no fault insurance cover laws also do not allow the victim of the accident to sue the person responsible for the accident and as such, they can move around freely.
To sum up, the no fault insurance cover or the Personal Injury Protection cover is not concerned with the person responsible for the mishap and pays the insured directly without the person having to prove who was at fault. It is different from the conventional liability covers that require people to turn to the responsible party's insurance agencies to pay for the damages incurred. The system of no fault insurance can be seen as a replacement of the conventional liability system where people have to undergo a complicated set of mathematical calculations before reaching a suitable conclusion.
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