What Exactly is No-Fault Insurance?

Insurance continually evolves over time. Consumer needs, regulatory authority, and legal requirements each play a role in shaping how insurance policies are written and respond to claims. During the 1960s, all three played had a hand in creating what we today know as no-fault automobile insurance.

The Birth of No-Fault Insurance

More than fifty years ago, every aspect of the automobile industry appeared to be broken. Consumers and insurers alike were frustrated with the amount of time, effort, and expense necessary to settle automobile accident claims. The stress on the automobile insurance industry was reaching a breaking point.

The choke point for all parties involved in an automobile accident was determining who was legally liable for damage and injuries. Very few claims were being paid until fault was established. This was leaving accident victims paying out of their pocket for their own expenses.

As the 1970s rolled in, legislation was introduced in many states to address the burdensome claims process. The solution for 23 states and the Puerto Rico was to establish mandatory or optional no-fault auto insurance.  The result has been faster claim payments and lower auto insurance costs.

No-Fault Insurance Explained

No-fault automobile insurance, also known as Personal Injury Protection (PIP), does not remove legal liability. Instead, it makes money available to you and your passengers to pay medical bills resulting from an accident, regardless of who caused the accident.

For thirteen states, no-fault insurance is mandatory while the remaining states offer no-fault coverage as an add-on option. The amount of coverage under no-fault insurance is capped. For example, $10,000 of no-fault coverage is mandatory in the State of Florida.

The coverage can be used to pay for:

• Lost income
• Funeral expenses
• Hospital and medical expenses

No-fault insurance does not pay for damage to your vehicle or theft of property. If you have questions about your automobile insurance and whether no-fault insurance applies to you, contact our office today.