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What is No-Fault Auto Insurance Law?


No-Fault Auto Insurance is a relatively recent concept on the stage when one considers the long history of insurance. The term “no-fault insurance” in itself is somewhat confusing to consumers. Fault or blame for accidents is assigned under “no-fault insurance”. The biggest difference between no-fault and the more traditional approach to insurance (known as “tort”) is that your company pays for your claim and the other party’s insurance pays for their claim.

Why Do Some States Utilize This Form of Insurance?

No-fault Auto Insurance came into play as a result of skyrocketing costs associated with insurance companies fighting it out in court to decide which company was going to pay for all of the claims associated with the accident. Because this system (the tort system) was an adversarial winner-take-all approach, the court battles were long and costly. As a result, governments in many regions of North America came up with legislation enforcing this new no-fault concept. Basically, they said that when an accident occurs each company pays the claim that their own client makes, regardless of who is at fault.

 

Under no-fault insurance, “fault” or who is to blame for the accident is assessed by the insurance companies. However this has nothing to do with which company will pay out the claim. Your company will always pay for your claim up to the limits of your policy and the other driver’s insurance will always pay for his claim. The insurance companies do assign blame or “fault” for two reasons. The first reason is that they want to keep their statistics regarding the individual (you) so that they can adjust the individual’s rates according to their driving record. So, if you are found by your insurance company to be “at fault” it is likely that your rates will go up. The second reason is that with some companies and in some regions the driver that is not found to be “at fault” will not have to pay his or her deductible. When the insurance companies investigate an accident and determine “fault”, they can place all of the blame on one party or the other. Alternatively, they can assign “fault” or blame in a percentage to each driver. For example, one driver may be 60% to blame for the accident and the other 40% to blame.

What Are Some of The Advantages of No-Fault Law?

Depending upon the geographical region that you live in and the laws of that region, you may still have the right to sue the other driver (and their insurance company) for lost wages and compensation for pain and injury with the help of a personal injury law firm in Lansing, Michigan. This is most often done when an individual’s policy limits does not cover all of the expenses they incur as a result of the accident. They then sue the driver that they consider to be “at fault” in the accident in order to recover funds to pay for medical bills, property damage, and compensate for pain and suffering.

There are two main advantages to the consumer in regard to no-fault auto insurance. Claims get settled more quickly because there aren’t several insurance companies fighting over “fault” to be assigned before they are willing to pay the claims, and the individual is dealing only with his or her insurance company and not working through them to deal with another insurance company.

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