The term “no-fault auto insurance” is used by most people to refer to a situation where auto insurance companies will provide financial coverage regardless of whose fault a collision is. This is not entirely accurate. No-fault insurance actually means that the auto insurance company will provide financial support to their customers while they garner information from the parties involved and assess damage and liability. This covers the policyholder during that uncertain period before a full assessment is made and a decision reached.
Some facts about no-fault auto insurance:
Legally required – Many states require no-fault insurance by law. This means that insurance companies have to provide this form of insurance and it works to the advantage of drivers. In many states, however, no-fault insurance is discretionary, and the driver may or may not opt for it because it does mean shelling out more money.
Unsuitable – For the states that did not adopt no-fault insurance mandatorily, the reason was that, once they tried it for brief periods of time, they found that the extra protection provided was not worth the increase in premium rate.
First-party Coverage – This term is used interchangeably with no-fault insurance. But no-fault insurance refers more to state automobile insurance laws in which a policyholders and his or her passengers are covered by the policyholders insurance company sans proof of fault, often where a restriction is prevalent in seeking recovery for losses caused by third parties via the civil justice system.
Confusion – People often get confused about no-fault auto insurance, thinking that it eschews the need for health insurance. This is not so; please don’t make such a mistake. If you are in need of immediate health care which is very costly, you cannot do without health insurance. Additional costs like co-pays will be covered by no-fault insurance.
Property damage – You will need a separate policy to cover this. No-fault insurance pertains to matters of personal well-being such as disability. So don’t expect the costs associated with damage to property to be covered by no-fault insurance.
Misuse of no-fault insurance
It is unfortunate that no-fault insurance has been misused since its inception. Insurance companies have been exploited by doctors and hospitals that have taken unfair advantage of the easy finance to cover expensive medical procedures and huge bills.
Those that live in states where no-fault insurance is legally required tend to notice their premiums going up over the years. This is because of the undue advantage taken by policy holders to arrange additional medical treatments under the purview of the policy. Unfortunately, the burden is borne by everyone for the poor behavior of a few: everyone suffers. What we can do is to use this coverage for the purpose it was meant and not try to stretch it.
An awareness of this fact is necessary: just because a state offers no-fault insurance it does not mean you can happily drive without an auto insurance policy. Auto insurance policies are required by law and you must adhere to that.
In the final analysis it appears that the ones who truly benefit from this form of insurance are the ones who are in the right in a collision, even though, initially, everyone is covered. If a person is covered by the no-fault clause in someone else’s policy and then found to be at fault, he may have to reimburse the company for the amount received on account of being given the benefit of the doubt.
Thus we see that, what is important is to do one’s homework. Thorough research will ensure that you are properly covered on all fronts and receive no rude shocks, but instead, pleasant surprises in terms of how much money you gain back during unforeseen accidents. Hopefully none of them happen to you.