In order to understand how car insurance works when you are not in fault, you must understand the difference between At-Fault (Tort) and No-Fault States.
Key Point to Know: At-Fault/No-Fault differentiation matters only for the Medical bills after the accident. The property damage is still paid by the guilty (at-fault) driver.
NO-FAULT States:
In NO-FAULT states, if an accident happens, you file a claim with YOUR OWN insurance, and they make an automatic payment for your medical bills up to a certain limit, REGARDLESS of who was at fault.
As a part of the requirement, No-Fault states require all drivers to purchase Personal Injury Protection (PIP) coverage along with the auto policy.
EXAMPLE:
While driving to a grocery store, you get hit by a car and sustain Bodily Injury. An ambulance is called to the scene and they take you to a hospital, where you are given treatment. You get released and you send your hospital bill to your own insurance for processing. Your insurer pays out the claim, even though the injury was not your fault.
NO-FAULT states are: Florida, Hawaii, Kansas, Kentucky, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Pennsylvania, and Utah.
Key Points to Know:
Positives of No-Fault Insurance:
- Premiums tend to be lower in No-Fault states
- Medical claims are paid out fast
- It reduces the right to sue. Since your own insurance pays, the interaction with the other side is minimal.
Negatives of the No-Fault Insurance:
- Limited or non-existent payment for pain and suffering and non-economic damages.
- Bad drivers have a blanket of protection from being sued. This “lawlessness” may perpetuate bad driving habits.
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AT-FAULT States:
In AT-FAULT states, the claim goes to the At-Fault side’s insurance company, which conducts an investigation, during which each party of the accident is given an At-Fault percentage. That is the percentage of the accident that they are liable for. Quite frequently there is a clear side at fault and that person is given 100% of fault and their insurance has to cover it (up to their policy limits)..
But in some other cases other parties to an accident may be considered at fault. For example, if you were not wearing a seatbelt when a car struck you at an intersection, and because of that you suffered a bodily injury – the other vehicle’s (At-Fault) insurer will most likely claim that you were partially at fault and will deduct a certain percentage from the total claim payout. They can say, for example, that you were 25% at fault because you were illegally driving without using a seatbelt.
Another example would be if you were on the phone or texting when the accident occurs. Yet again, you can be partially blamed for the accident.
AT-FAULT states fall into 2 categories: where Personal Injury Protection (PIP) is required and where PIP is optional.
As of this writing, PIP is required is Arkansas, Delaware, Maryland, and Oregon.
PIP is optional in New Hampshire, South Dakota, Texas, Virginia, Washington, and Wisconsin.
The rest of the states are a variation of AT-FAULT states.
PRO TIP:
Always learn about the insurance regulations in your neighboring states. Their minimum coverage can be better or worse that in your home state. This allows you to adjust your insurance needs for more protection – if needed. Reach out to your Auto insurance agent and they will be happy to explain your options to you.