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What is No-Fault Insurance?

Driver in front of crashed car - copyright: Dmitry Kalinovsky

Your Own Company Pays

The basic idea of a no-fault insurance is that you, when injured in an accident, get compensation from your own insurance company instead of having to show the fault of another driver to get money from the other driver’s insurance company.

The system focus only on bodily injury. Property damages are still based on fault.

You Cannot Sue

Another important part of the system is to prohibit a victim from suing the other driver, unless the injuries met a certain level of seriousness.

High Costs

The no-fault insurance become popular in the seventies, but has since then fallen out of favor. The main reason is the high cost. Under the no-fault system insurance companies pay more for medical services than under the traditional system. Premiums are also higher.

About half of the states originally introduced no-fault laws between 1970 and 1975. Since then, some states have abandoned the system. Others have made it possible to choose between traditional liability insurance and a no-fault insurance. Eight states have an “add-on” to their no-fault law, in which you keep the right to sue the driver at fault.

Most U.S. states have the traditional liability system for car insurance.

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