No-fault auto insurance is usually referred to loosely to indicate any car insurance policy that lets holders collect from financial losses against their own company whether they are at fault or not. However, no-fault auto insurance in its strictest form only applies to state laws, which restrict the right to sue other parties and provide for first-party benefit payments on a no-fault basis. The policyholder’s coverage is also known as personal injury protection, but it is more commonly abbreviated as PIP.
With the current laws set in place for no-fault auto insurance, motorists may be able to sue for pain and suffering or severe injuries if the case meets various conditions. Also known as thresholds, these conditions only relate to injury severity. Verbal terms are often used to express them, and they may also be written in dollar amounts of medical bills. There are also some laws that include minimum requirements for the number of days a disability occurred after an accident. Due to higher thresholds for no-fault systems restricting litigation, claim payments are usually delayed. They also tend to lower the costs of paying claims. With verbal thresholds, incentives to inflate claims with dollar targets for medical purposes are eliminated. Verbal thresholds have changed in some states over time to include a broad judicial interpretation. In addition to this, PIP coverage has been abused. Dishonest clinics and medical professionals have committed fraud by charging patients for expensive and unnecessary medical care. When this happens, the costs increase for everyone.
There are more than 10 states with no-fault auto insurance laws, and Puerto Rico also has them. Some states have choice no-fault laws, and motorists in some states may reject lawsuit thresholds in order to sue for injuries. To learn about state-specific laws and information, discuss concerns with an agent. There are four different categories for state auto liability laws. These include no-fault liability, tort liability, choice no-fault liability and add-on liability. The biggest differences exist in whether the policyholder’s insurer covers benefits for first parties and whether there are restrictions on the right to sue. As regulators, consumers and insurers have looked for ways to reduce costs and make compensation delivery faster, these systems have continued to change and evolve.
The no-fault system is meant to lower the cost of auto coverage by removing small claims from courts. Every insurer must compensate policyholders or first parties for minor injuries whether the policyholder was to blame or not. The third party is the other injured party, and the second party is the insurer.