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No-Fault Auto Insurance: How Will It Impact Your Premiums?

The United States’ roads are among the busiest in the world. Reports show that there were over 284 million vehicles in operation by the end of 2021. This congestion has contributed to the high number of road accidents recorded in recent years. For instance, over 12.15 million vehicles were involved in traffic crashes in 2019.

This ever-rising number of road accidents is a devastating trend that needs an urgent solution. Remember, you can also be a victim of these crashes, even if you’re an excellent driver. As such, you must acquaint yourself with important car insurance policy information. 

In an accident, the at-fault driver’s insurance company is usually required to pay for the damages. However, some states allow a no-fault policy. This compels your insurance company to handle your claim regardless of who caused the accident. It saves you the frustration of going through a lengthy court process and dealing with the other driver’s insurance company.

Although the policy may not cover everyone, depending on the state. For instance, some exceptions in New York include non-residents and motorcycle riders. If you’re a New York resident and want to learn more, Raphaelson law covers no fault exclusions in this region.

What Is No-Fault Insurance?

Also known as personal injury protection (PIP), no-fault insurance is a cover that pays for car-crash related damages regardless of who is at fault. For instance, if you’re involved in a traffic crash and get injured, this insurance will cover the medical bills and property damage even if you’re at fault.

The no-fault insurance cover is available in 17 states and is mandatory in 12 states. The other five states allow you to include this cover as an optional add-on to your insurance policy. Most no-fault insurance assures that the insured will receive compensation even when they sustain injuries as passengers in someone else’s car. The insurance company may also be required to cover lost wages and funeral expenses.

The Main Objective Of No-Fault Insurance

This policy aims to reduce car crash-related lawsuits, hence easing court demands. You can only file a lawsuit against the at-fault driver if the accident meets certain thresholds. For instance, you’ll be allowed to explore this route if the injuries sustained are severe, like paralysis or losing a limb. And these injuries aren’t far-fetched considering that traffic crashes lead to at least 1.3 million fatalities yearly.

It’s worth noting that the laws vary from state to state and are subject to legislative changes. 

How A No-Fault Auto Insurance Works

Being compensated by your insurance company doesn’t necessarily mean you were not the at-fault driver. As mentioned earlier, this policy only eliminates the lengthy court processes if the damages aren’t severe. But no accident happens in a vacuum. There is always at least one party that’s either partially or fully responsible for the losses.

Therefore, the insurance company will investigate the accident once the insured is compensated. The representatives will use all the evidence available to determine who was at fault in the accident. After this process, the insurer will use the results to evaluate an individual’s risk and decide how that will affect their premiums. 

Fault determination may vary from one state to another, but the process is generally the same. The insurance company is required to use Fault Determination Rules to assign a percentage of fault to each driver. These rules highlight various accident scenarios and state the fault ratings of each party. 

You must understand that fault determination doesn’t influence the payout of your claim. You’ll still receive your compensation provided the policy covers the losses incurred after the accident. However, the results of the insurer’s investigations may lead to adjustments in your insurance rates. 

Closeup of crashed car window in car accident.

How No-Fault Insurance May Impact Your Premiums

If the insurer finds you at fault, your premiums will likely increase. So, why will you be required to pay more in subsequent months? The insurer will treat the incident as an at-fault accident. 

Therefore, the company will assess you as a high-risk driver. That means you’re likely to be involved in more accidents and file other claims in the future. In the insurer’s view, such drivers are more expensive to insure.

You can avoid a rate increase if you have accident forgiveness as part of your insurance policy. It’s a feature that protects your driving history and shields you against poor ratings after an at-fault accident. However, it’s no guarantee your rates won’t be affected. In fact, most insurance companies only forgive the first at-fault accident. 

By how much will your premiums increase? The amount added to your current rates will depend on the insurer and several other factors. For one, your previous driving habits will have a significant impact because they show your level of risk. Age, gender, and other demographic factors may also affect the rate increase. 

There will be cases where the opposite driver might be at-fault in the accident. Of course, the insurance company will assess the situation from all perspectives before they can be satisfied that you were not at fault. If the results favor you, the insurance rates won’t be affected. However, this may also vary with insurance policies in your state. So, it would be best to acquaint yourself with your area’s current laws and regulations and your insurer’s policies. 

Do Other Legal Processes Affect A No-Fault Insurance?

It’s important to note that other legal traffic processes do not imply no-fault insurance covers. This policy only deals with the settlement of your compensation after an accident. Therefore, you’ll still receive your payout even if the police charge you for a driving offense related to the incident. If you’re found guilty, the same will reflect on your subsequent premiums once the insurer completes its assessment. 

Conclusion

As a driver, you can be involved in an at-fault or not-at-fault accident. In a not-at-fault accident, you may need to go through a lengthy legal process before the other driver’s insurer compensates you. On the other hand, a no-fault auto insurance policy eliminates this process and ensures that your insurer compensates you regardless of who was at fault. However, if the insurance company finds you in the wrong after their assessment, your premiums may increase. Of course, you can apply for accident forgiveness, but they may accept this only in your first at-fault accident.

 

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