Each state has their own laws with regards to what kind of car insurance drivers must carry. The majority of states have what is called tort insurance, sometimes called at-fault insurance. Some though, require drivers to purchase no-fault insurance. It has many of the same components as tort insurance, but there are some notable differences.
What are the different components of car insurance?
Most car insurance policies are made up of a few different types of coverage:
- Liability – This is mandatory in most states. There is usually also a minimum amount of liability coverage drivers must have. It comes in two forms:
- Bodily Injury Liability – This may help cover costs related to other people’s injuries if you are at fault in an accident.
- Property Damage Liability – This may help pay for damages to another person’s property if you are liable for an accident.
- Uninsured/Underinsured Motorist – This protects the policyholder in the event that they are involved in an accident where the other driver is at fault and doesn’t possess sufficient insurance to cover all your medical bills.
- Collision – This helps the policyholder pay for damages resulting in the collision with an object, such as a wall, and another vehicle.
- Comprehensive – This helps cover damage to the policyholder’s car from things like natural disasters, fire, theft, etc.
- Medical Payment – This may help cover pay for medical treatment after the policyholder, passengers, or family members are injured in an accident.
- Personal Injury Protection – PIP is only available in some states. It may help pay for medical expenses after an accident.
How does the insurance claims process work?
The insurance process begins when you contact your insurance company after an accident. In most states, the process that follows is fairly consistent. You’ll need to give your insurance company whatever information they ask for, like an account of the accident and any resulting damages or injuries. Next, they will determine who is at fault, or what percent each person involved is at fault. While this is occurring, all parties involved are likely having damages and injuries assessed. Once fault is established, your insurance company will let you know what portion of any resulting bills they will cover. The rest, which includes at least your deductible if you have one, is your responsibility.
At this point, a lawsuit may materialize. There are a number of reasons this may occur, but one of the more common ones is that the insurance company of the driver not at fault didn’t offer them enough money to cover all their resulting bills. There can be a number of reasons for this:
- Insufficient coverage by the policyholder
- Cost considerations by the insurance company
- Uninsured driver
If you are involved in a lawsuit, there’s a few things you should do immediately:
- Document Everything – This is especially important if you are the one doing the suing. One of the most important aspects of this sort of litigation is evidence. You’ll need to justify not only the amount of money you should receive, but why you should receive it from the person you are suing. As such, you should take photos of the accident, get physical copies of repair quotes or medical bills. You’ll also need to do things like track missed hours at work and lost pay.
- Get a Car Accident Lawyer – They will not only be intimately familiar with the law with regards to car accident litigation, but they will also be able to advise you on things like documents you’ll need to retain and how much money you’re likely to receive. As a bonus, they often work on a contingency fee basis. This means they take a portion of whatever you come away with after the court case.
Does that sound potentially expensive and tedious? If so, you’re not the only one. That process is the very reason for the creation of no-fault insurance.
How is no fault insurance different than regular car insurance?
One of the major differences between regular insurance and no-fault insurance is that nearly all claims are paid through the policyholder’s own insurance company. This means they are responsible for things like your medical bills and lost wages, no matter which driver was at fault. On the surface, this is much simpler. If your insurance is guaranteed to cover some portion or amount of any expenses and lost wages, there’s no need to sue the other driver. That’s true. However, you aren’t permitted to make a claim for pain and suffering against your own car insurance company. Additionally, you can only pursue such a claim against the other driver if a set of conditions are met. Depending on the policy, some of the conditions may be:
- Medical bills exceed a certain amount
- Broken bone(s)
- Permanent, major disability
- Substantial full disability lasting at least 90 days
While you aren’t required to do things like give statements to the other party’s insurance company, you are frequently required to cooperate with your own. This can include things like receiving a medical examination from a physician selected by your insurance company. Failure to cooperate may give the company grounds to not pay your claim. Note that no-fault insurance is designed to cover things like medical bills, there are things that it doesn’t cover. For that, you’ll need other types of liability insurance.
What does no-fault insurance not cover?
No-fault insurance doesn’t cover the following:
- Property damage
- Medical expenses over your coverage limit
Normally, those are covered by the appropriate other components of your car insurance. This is because no-fault insurance is only one component of your coverage. Depending on state laws, you may be required to carry some or all of these other insurance components.
Auto insurance is complicated. A single policy has multiple components. And depending on the state you live in you may have to elect between tort and no-fault insurance, which can have major implications for the handling of any claims you make. Because of this, it’s important to research local car insurance laws when you get a new policy.