What Drivers Should Know About No-Fault Insurance Laws

When it comes to car insurance, you’re likely most familiar with policies that exist in at-fault states. But what if you live in a no-fault insurance state? How might that affect your coverage? We spoke to Erika Tortorici, the owner and principal of Optimum Insurance Solutions and Matt Brannon, a data journalist at Insurify, to get their insights on this kind of insurance. They explained what it is and what it means for you as a driver.

What Does No-Fault Mean in the Context of Car Insurance?

When it comes to car insurance, there are two kinds of states. “Most states are at fault,” Brannon says. “When a collision takes place in an at-fault state, insurers determine which party is responsible for causing the incident. The person who is deemed at fault is financially responsible, and their insurance would cover the injuries of the other driver. In no-fault states, each driver files a claim with their own insurance to cover their injuries, regardless of who caused the accident.”

“No-fault insurance helps pay for your medical bills and lost wages after a car accident, even if you weren’t the one who caused it,” Tortorici adds.

Does Living in a No-Fault Insurance State Affect Premiums?

You might think that a different claims process would change how premiums work, and it does. But it’s not a simple effect. “In theory, no-fault laws should reduce car insurance premiums because they simplify the claims process,” Brannon says. “In practice, drivers in no-fault states tend to pay slightly higher premiums on average. This is partly because, “some drivers will exaggerate the extent of their injuries, leading to higher insurance payouts.”  Brannon explains that “when insurers have to deal with more overhead costs, they often raise premiums to offset those losses.”

What States Does This Policy Apply To?

The vast majority of states are at-fault states, but both Tortorici and Brannon say that the following states are no-fault insurance states:

• Florida
• Hawaii
• Kansas
• Kentucky
• Massachusetts
• Michigan
• Minnesota
• New Jersey
• New York
• North Dakota
• Pennsylvania
• Utah

What Happens if You Get Into an Accident?

“If you get into an accident and have no-fault insurance, it means you’ll turn to your own insurance company to cover medical expenses and lost wages for you and your passengers, no matter who caused the crash,” says Tortorici.

“Those funds would usually come out of your personal injury protection (PIP) portion of your policy,” Brannon adds. “That would also help cover lost wages if you’re unable to work. That money only goes toward your expenses, not the other driver’s, regardless of who caused the accident.”

In some ways, this is an advantage. For example, Tortorici says, “You don’t have to wait for the other driver’s insurance to pay out, which helps things move faster.” But she explains that vehicle damage coverage might work differently. According to her, “damage to your car would still depend on the type of coverage you carry, like collision insurance.” Brannon agrees, clarifying that “in no-fault states, the driver who caused an accident can still be held liable for vehicle damage, however.”

What if Your Primary Residence and Insurance Aren’t Based in a No-fault State?

Since it’s quite possible that you’ll travel from your own no-fault state into an at-fault state, or vice versa, it’s important to understand how this affects your coverage. “If your primary residence and insurance are based in a non–no-fault state, your policy still follows your vehicle wherever you go,” Tortorici begins.

She continues on, explaining that “that means if you’re driving in a no-fault state, your own coverage would still apply the same way it does at home.” There’s a caveat with that, though. “Insurance companies can adjust the policy depending on the state’s rules, so in some cases they may align your coverage with local requirements.”

Brannon clarifies this caveat, explaining that the laws of where the accident took place have an impact. If they do, he says, then “if you live in and drive primarily in a no-fault state, and then cause an accident while driving in an at-fault state, you could be held liable for the other driver’s medical expenses, unlike you would in your home state.” Brannon also says the flip side is often true, though. If the situation is the same but “the other driver causes the accident, generally their insurance coverage would cover your injuries.”

About the Experts

• Erika Tortorici is the owner and principal of Optimum Insurance Solutions.
• Matt Brannon is a data journalist at Insurify.

The post What Drivers Should Know About No-Fault Insurance Laws appeared first on Family Handyman.

Article source here: What Drivers Should Know About No-Fault Insurance Laws