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    No Fault Auto Insurance


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    This term is frequently incorrectly used for all auto insurance policies which grant client a full recover of financial losses from his own insurance company, regardless of fault. In fact no-fault works only for state regulations which at the same time provide for the coverage of no-fault policyholders benefits and do not allow to sue, this feature is known as "limited tort". The first party benefit payment is so-called personal injury protection (PIP). Normally no-fault payment has got a limit. Regularly payout is granted only for medical charges and lost income up to the limits of the insurance coverage. Disturbance, personal troubles and anything else beyond the coverage limits won't be compensated. Although you can sue the driver who is at fault of an accident to get full compensation if your medical charges and other losses are higher than the policy coverage. But these laws about suing a person at fault depend on the state laws. In some states it's allowed by rules to sue a person at fault for a compensation beyond the insurance policy limits in a case when hospitalization is needed, bone fracture, other serious injuries. In some states it is allowed to sue if the medical charges in common overcome a specified dollar limit which is defined specially in every state.

    The Threshold of "No-fault"

    There are some strict requirements under "no fault" rules on which it depends if a driver can sue for serious injuries and suffering. This "threshold" depends on how serious injury is. There are two kinds of expression for these requirements: monetary threshold - total dollar amount of medical charges, and verbal threshold - verbal description of injury requirements. Also the threshold may depend on length of disability period caused by the accident. For the reason no-fault systems with a high level threshold limit litigation, they are to lower charges and protractions in paying claims. When there is a monetary "aims" for medical bills persists a temptation to enlarge claims using all opportunities. This temptation can be bound with verbal thresholds. On the other hand, verbal threshold can be widely interpreted in jury, while PIP coverage often becomes a case of fraud when hospitals and doctors enlarge the payment charging for unneeded extra procedures.

    No-Fault Coverage

    Some states let you choose your kind of no fault insurance: a no-fault vehicle insurance coverage or a regular tort liability policy. In New Jersey and Pennsylvania the no-fault insurance uses a verbal threshold. Kentucky uses a monetary threshold. Tort liability: In states with traditional tort liability, there are no limits on lawsuits. A first-party driver at fault in an accident can be sued by the third-party involved in it for both suffering and monetary losses including medical. There are also "add-on" states, where policyholders get compensation from their insurance company just like in no fault states, but no limits on lawsuits are working there. In this case policyholder's advantage goes as an add-on for the regular tort liability system. In the states where add-on system is working, policyholder coverage may not be mandatory and the advantage is usually less than in pure no-fault states.

    No-Fault Auto Insurance Effectiveness

    Insurance companies usually prefer rules that provide for verbal thresholds on suits to monetary thresholds. The main problem about dollar threshold is that it creates incentives for fraud and unnecessary inflate of medical bills. Besides, in a case the rule doesn't contain a special inflation correlation adjustment included it becomes ineffective dealing with curbing litigation (growth of medical costs is about 10% yearly). Since March of 1989 the "no fault" system and severe limits on filing suit have received additional background when a study on injury claim costs has been published. "Compensation for Automobile Injuries in the United States," - the research by the All-Industry Research Advisory Council, proved states with strict "no fault" laws to be more effective than all other states in holding auto injury costs on a lower level during the years 1977-1987. In NY regular injury charges enlarged up to 73%, in Florida 71% and in Michigan 112%. (Besides, in these states with strict "no fault" laws, total injury cost amounts were much less, especially in Michigan.) Bodily injury prices in all states increased for average of 146% during this term.

    States with No Fault Coverage

    No fault auto insurance regulations exist in 12 states:

    • Florida
    • Hawaii
    • Kansas
    • Kentucky
    • Massachusetts
    • Michigan
    • Minnesota
    • New Jersey
    • New York
    • North Dakota
    • Pennsylvania
    • Utah

     

    
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