No-Fault Car Insurance - The Pros and Cons

Over the course of the past several decades, numerous states have enacted “no-fault” insurance laws. Many motorists on the road today falsely believe that no-fault laws indemnify them against any possible losses beyond their insurance deductible, or even worse, some irresponsible drivers think that they can go without mandatory insurance because the no-fault laws in their states. There is a lot of misinformation about no-fault insurance, but before examining it, we must first answer the question - what are the pros and cons of no-fault laws?

Why ‘No-Fault’ in the First Place?

Logically speaking, the negligent party in an accident should bear the responsibility for all damages incurred. If you’re in an accident in which the other driver is clearly at fault, why should your insurance company have to pay for the damages to your car? After all, when you file a claim, your car insurance rates typically go up, regardless of whether the damages were your fault or not.

The problem is that courts must decide who was at fault. If the negligent party denies blame (and why wouldn’t he?), then you have to take him to court. In states without no-fault insurance laws, the legal system is clogged with such cases. This is why many states enacted laws that not only eliminate the issue of “fault,” but also specify the amount paid for medical expenses and lost wages. Instead of settling things in court, under no-fault insurance, each person accepts responsibility for his or her own damages and losses and collects directly from their own insurance company.

Comparing No-Fault to Traditional Insurance

To good drivers, no-fault insurance may seem unfair. After all, if only the negligent party were held responsible for damages, good drivers would file a lot fewer claims, and thus, could expect to pay lower premiums. The problem is that without no-fault laws, good drivers have to drag their counterparts into court in order to collect, and this not only causes congestion in the legal system, it also greatly adds to the amount of time it takes for injured motorists to get paid. By the time all of the lawyers fees and court costs are added in, the end result is that even good drivers may not save much money in comparison to no-fault, and premiums for bad drivers are often so high that they’re unable to afford insurance - which creates its own set of problems. For these reasons, most experts think that no-fault insurance is a good idea. Even famed consumer advocate, Ralph Nader, who is normally opposed to “tort reform,” was a major proponent of no-fault laws when they began being enacted years ago.

No-Fault, State-by-State

It’s important to note that while many states have some variety of no-fault insurance, not one has “pure no-fault” in which victims are completely prohibited from suing the party at fault - although Michigan comes pretty close. Most no-fault states allow injured parties to bring suit in the event that they are severely injured, or that the offending action was extremely negligent or even deliberate.

It’s also important for drivers to realize that state’s no-fault laws do not excuse them from the legal responsibility of carrying insurance. Some people think that since their state has no-fault insurance, they cannot be held accountable for damages caused to another person or his vehicle. But the fact is that in most no-fault states, you can be held accountable for damages to another driver if you don’t have insurance. In other words, if you don’t have insurance, it is your fault, not no-fault.

This is why it is important to be an informed consumer. You need to have the right amount of insurance coverage to fit your needs and your budget. Having too little insurance is an obvious problem, but paying too much for coverage you don’t need is nearly as bad. Insurance is not a “one size fits all” proposition, and in order to get the most value for your money, you have to shop around. Luckily, with the internet and web sites like this one, comparison insurance shopping has never been easier.