No-Fault Insurance Explained

As you shop for a car insurance policy, one term you are likely to encounter is "no-fault" insurance. But what is no-fault insurance, exactly, and what can it do for you?

Put simply, no-fault auto insurance pays for injuries to you or your passengers and damage to your vehicle after an accident, whether or not the accident was your fault. Instead of spending time trading insurance information with the other party in a car accident, you each file claims with your own insurance companies.

No-fault insurance is not available nationwide, but in nine of the states where it is available, it's actually required by state law. This is done in order to reduce the amount of money and time spent on court cases that attempt to determine who was at fault in a car crash. Other benefits of no-fault insurance are added protection against uninsured drivers, or underinsured drivers who may not have the liability coverage required by your state, or in cases where damages exceed the other driver's policy limits.

There are two things to remember about no-fault insurance:

1. If both drivers in a crash are carrying no-fault insurance, there is often a restriction against suing for excess damages, unless there are severe injuries or death as a result of the auto accident.
2. If the driver who hits you is not carrying no-fault insurance, you are allowed to sue for medical expenses and property damages.

It's also important to remember that no-fault insurance only relates to payment of claims. A police report will still determine the at-fault party, and that person will receive a citation, and points on his or her license.