Why No-Fault Insurance Is a No-Brainer

When you find yourself involved in a car accident, it's not the ideal moment to discover what kind of auto insurance coverage you possess. In certain states, there is a mandatory type of car insurance coverage designed to protect drivers in the event of an accident.

What is no-fault insurance?

No-fault insurance, also known as personal injury protection insurance (PIP), is a type of auto insurance that covers medical expenses for you and any passengers, regardless of who is at fault in a car accident. This insurance can also cover income lost due to hospitalization and absence from work.

The Centers for Disease Control and Prevention (CDC) reported that approximately $33 billion in work income was lost due to crash injuries in 2012. Additionally, medical costs totaled $18 billion, with 75% of those expenses occurring within the first 18 months after a crash injury.

In the 1970s, no-fault insurance was introduced into legislation as a way to simplify the process of determining fault in auto accidents. This allowed people to purchase PIP insurance for covering medical expenses caused by accidents. Since then, some states have made it a legal requirement for drivers to obtain this type of insurance or a variation of it.

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Do you live in a no-fault insurance state?

Currently, the following 14 states require a certain level of no-fault insurance coverage:

• Delaware

• Florida

• Hawaii

• Kansas

• Kentucky

• Massachusetts

• Michigan

• Minnesota

• New Jersey

• New York

• North Dakota

• Oregon

• Pennsylvania

• Utah

No-fault insurance is available but not mandatory in these 9 states:

• Arkansas*

• District of Columbia

• Maryland*

• New Hampshire

• South Dakota

• Texas

• Virginia

• Washington

• Wisconsin

*In some states, PIP is included in every auto insurance policy, but drivers may have the option to waive it.

Making a no-fault insurance claim

If you reside in a no-fault insurance state, there are specific guidelines for making a claim. For example, instead of providing a statement to the other party's insurance provider, you work directly with your own insurer.

Depending on your policy, you may need to provide your insurer with a statement and medical documentation of damages related to the accident. Your insurance company may also appoint the physician or hospital responsible for examining you after an accident.

While you may not have the freedom to choose where you receive treatment, working with these insurance-approved doctors or hospitals ensures your claim is processed quickly. Legal proceedings, paperwork, and treatment can quickly become overwhelming.

It's crucial to provide your insurer with all the information they request after an accident, or they may deny coverage entirely.

Limitations to coverage

Different situations require different insurance coverage.

Suppose you hit a business building, and the building owner's insurance doesn't cover the damages. In this scenario, you would need auto insurance with property damage coverage to pay for your share of the accident.

No-fault coverage only covers specific types of damage in a car accident. Here are the types of damages that PIP insurance may cover:

• Personal or passenger injuries and medical expenses resulting from the accident

• Funeral expenses in fatal accidents

• Loss of income due to the inability to work (medical recovery after accidents)

You'll notice that there is no coverage for damage to your vehicle or buildings. If your accident involves vehicle damage, you'll need additional auto insurance, such as collision insurance, to be covered

Is no-fault insurance right for you?

While health insurance can be an alternative to no-fault insurance, it doesn't provide the same coverage for severe accidents, and you'll usually have to pay a deductible.

If you're unsure whether PIP coverage is suitable for you, here are a few factors to consider:

• Are you at risk of getting into a serious car accident based on your living situation?

• Can you afford all the injury expenses associated with accidents?

• Would it give you peace of mind knowing these expenses are covered?

Knowing that you and your passengers will be fully taken care of in an accident can help you decide if it's the right option for you and determine the limits to set in your policy.

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