What does it mean to live in a no-fault auto insurance state?
You are moving to a new state and while going through your moving checklist, you contact your auto insurance company about your car insurance. Your auto insurance agent tells you that you are about to move to a state that has “no-fault insurance”, something you’ve never heard of before. Here’s an in-depth explanation.
No-fault auto insurance was adopted by a number of states a few decades ago, with the idea that it would save people, auto insurance companies and the courts the hassle of too many lawsuits for minor injuries and damages. In states with no-fault auto insurance, your auto insurance company pays for your medical payments as well as possibly other benefits (partial loss of wages, childcare, funeral benefits, etc) following an accident, regardless of which party is eventually found to be at fault. Each state has set coverage minimums, anywhere from $10,000 to a few hundred thousand dollars in some states.
What this means is that if you live in one of these states, you can pay your medical and other bills up to the limit of your no-fault coverage and your auto insurance company is required by law to cover it – even if you drive yourself off the side of the road (but please don’t do that). As such, especially for people that do not have medical insurance, it provides a level of security while driving. Also, no-fault auto insurance is not limited to automobiles – all types of motorized vehicles are generally covered.
All of this guaranteed coverage does, however, mean that in general, rates in no-fault auto insurance states are higher. In some states you are allowed to buy extra no-fault coverage over the standard (required) coverage if you do not have any other form of medical coverage, but not all states allow for this option. Either way, if you exceed your limits, you will then have to turn to your medical insurance, pay out of your own pocket, or – if another party is found to be at fault – pursue a lawsuit.