The current system of auto insurance across America is profoundly confusing to most consumers who may have trouble differentiating between no-fault coverage and traditional tort coverage. Our patchwork system means drivers should know the difference between these two systems, as well as what their state mandates or provides and how it is used in an accident situation.
No-fault insurance is an alternative to traditional tort insurance. No-fault car insurance coverage was made to keep small claims from going through the courts. In traditional tort insurance, a person injured in an accident seeks compensation directly from the at fault driver. In a “no-fault” situation, states set up auto insurance policies where instead of going after the at fault driver, the victim simply collects from his or her own insurer. In exchange for giving up some of these rights to sue in smaller cases, the auto insurance purchaser often gets a break on premiums. However, some financial experts counsel against going for the bottom dollar and casually signing away tort ability.
What’s important to most drivers is to maintain the ability to sue through the courts for all kinds of costs associated with an accident, including lost wages, medical bills, and pain and suffering. In addition to no-fault systems, some states offer “limited tort,” which some drivers, including relatively uneducated consumers, may take to lower premium costs. In an accident situation, they find they have signed away their right to seek some types of compensation. No-fault systems can work a little like this, according to some consumer advocates, and drivers have to be sure that their no-fault coverage allows them to collect for all of the costs of a personal injury.
The most important thing is to understand the “threshold” where you can regain the right to sue under a no-fault coverage situation. In states offering both systems, consumers can decide based on a thorough understanding of how much they would have to lose by signing away certain tort-related abilities. Lots of financial experts claim the likelihood of missing out on pain-and-suffering compensation is low, but each family or individual should take a look at actual compensation limits and choose for themselves.
Some states that require no-fault insurance include: Utah, North Dakota, New York, New Jersey, Minnesota, Michigan, Massachusetts, Kansas, Hawaii and Florida. Other states may have a mix of options. Make sure you check in with a state policy provider to see the specifics of what you must carry as a state resident. In states like Pennsylvania, drivers can sign up for the limited tort option mentioned above, but in accident situations, they may find themselves unable to regain rights to sue for compensation of pain and suffering.