Auto insurance

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

Car accident dangerous accident on the road. An SUV car crashes next to another on the road.

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

This ever-increasing number of road accidents is a devastating trend that requires an urgent solution. Remember that you can also be a victim of these accidents, even if you are an excellent driver. As such, you should familiarize yourself with important auto insurance policy information.

In the event of an accident, the responsible driver’s insurance company is usually liable to pay the damages. However, some states allow a no-fault policy. This forces your insurance company to process your claim regardless of who caused the accident. This saves you the frustration of going through a lengthy legal process and dealing with the other driver’s insurance company.

Although the policy does not cover everyone, depending on the state. For example, some exceptions in New York include non-residents and motorcyclists. If you are a New York resident and want to know more, The Raphaelson Act does not cover any fault exclusion in this region.

What is no-fault insurance?

Also known as personal injury protection (PIP), no-fault insurance is coverage that pays for damages related to a car accident, regardless of who is at fault. For example, if you are involved in a traffic accident and are injured, this insurance will cover medical expenses and property damage, even if you are at fault.

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

The main purpose of no-fault insurance

This policy aims to reduce lawsuits related to car accidents, thereby facilitating court applications. You can only take legal action against the driver at fault if the accident meets certain thresholds. For example, you will be allowed to explore this path if the injuries suffered are serious, such as paralysis or loss of a limb. And these injuries are not exaggerated considering that traffic accidents cause at least 1.3 million dead annual.

It should be noted that laws vary from state to state and are subject to legislative changes.

How no-fault car insurance works

Being compensated by your insurance company does not necessarily mean that you are not the driver at fault. As mentioned earlier, this policy only eliminates lengthy legal processes if the damages are not serious. But no accident happens in a vacuum. There is always at least one party who is partially or fully responsible for the losses.

Therefore, the insurance company will investigate the accident once the insured has been compensated. Representatives will use all available evidence to determine who was responsible for the accident. After this process, the insurer will use the results to assess an individual’s risk and decide how it will affect their premiums.

Defect determination may vary from state to state, but the process is generally the same. The insurance company is required to use fault determination rules to assign a fault percentage to each driver. These rules highlight various accident scenarios and indicate each party’s fault ratings.

You should understand that the determination of fault does not influence the payment of your claim. You will still receive your compensation provided the policy covers losses incurred after the accident. However, the results of the insurer’s investigations may lead to adjustments to your insurance rates.

Close up of a car window smashed in a car accident.

How no-fault insurance can impact your premiums

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

Therefore, the company will assess you as a high-risk driver. This means that you are likely to be involved in more accidents and file more claims in the future. In the opinion of the insurer, these drivers are more expensive to insure.

You can avoid a rate increase if you have accident forgiveness under your insurance policy. It is a feature that protects your driving history and protects you against bad grades after an at-fault accident. However, there is no guarantee that your rates will not be affected. In fact, most insurance companies only forgive the first at-fault accident.

How much will your premiums increase? The amount added to your current rates will depend on the insurer and several other factors. On the one hand, your past driving habits will have a significant impact because they show your level of risk. Age, gender, and other demographic factors can also affect the increased rate.

There will be instances where the opposite driver could be responsible for the accident. Of course, the insurance company will assess the situation from all angles before they can be satisfied that you are not at fault. If the results are favorable to you, the insurance rates will not be affected. However, this may also vary depending on your state’s insurance policies. It would therefore be best to familiarize yourself with the laws and regulations in your area and the policies of your insurer.

Do other legal proceedings affect no-fault insurance?

It is important to note that other traffic lawful processes do not involve no-fault insurance coverages. This policy only deals with the settlement of your compensation after an accident. Therefore, you will still receive your payment even if the police charge you with a traffic violation related to the incident. If you are found guilty, the same will affect your subsequent premiums once the insurer completes its assessment.

Conclusion

As a driver, you may be involved in a fault or no-fault accident. In a not-at-fault accident, you may have 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 at fault after their assessment, your premiums may increase. Of course, you can apply for accident forgiveness, but they can only accept it on your first at-fault accident.