What Is No-Fault Auto Insurance?

No-fault auto insurance is a type of insurance policy that provides insurance for a person involved in an auto accident with another vehicle regardless of which driver was at fault. In the United States, this type of policy is required in certain states and must include a minimum amount of monetary coverage. The main benefit to no-fault auto insurance is that it provides immediate coverage to those involved in auto accidents. It also can help to keep premium payments low by reducing the need for costly lawsuits between drivers, although most states that require no-fault coverage still leave some ability for drivers to sue for damages.

Auto insurance coverage allows for drivers to receive insurance benefits in case of accidents. Drivers generally a pay a regular amount to insurance companies known as a premium. They are then compensated by their insurance companies whenever an accident occurs, depending on the type of coverage they have. No-fault auto insurance is a particularly inclusive type of coverage, since it protects a driver even if he or she was at fault in a specific accident.

Several states in the US require no-fault auto insurance as a legal requirement of their drivers. By ensuring that all drivers are protected in this manner, these states can be assured that medical services will be available to anyone injured in an accident. Most of the states that require no-fault coverage also require that such policies offer a minimum amount of coverage. The minimum amount varies from state to state.

Even though no-fault auto insurance can be expensive for drivers to acquire, the states that require it can actually drive the premiums down for the policy-holders. If all drivers are covered, it removes the necessity of costly litigation between parties. This can reduce administrative costs associated with this type of litigation, savings that in turn can be passed on to policy-holders. As a result, no-fault insurance can be both effective and efficient in protecting drivers from high insurance costs.

It is important to understand that, even in states that require no-fault auto insurance, some forms of litigation between drivers are possible. Many states allow for litigation to take place depending upon the type of damage suffered by a driver or the amount of coverage that is needed. In those cases, litigation may still be aimed at the driver who was at fault in an accident. Some states allow drivers to opt out of a no-fault policy, thus enabling them to sue drivers at fault. Drivers who do opt out also open themselves up to possible lawsuits.