Auto Insurance

Many states have recently resorted to a “no-fault” automobile insurance policy. Despite research, these states feel that no fault policies will change the system significantly for the better. Since 1989, twelve states and Puerto Rico have had no-fault systems including: New Jersey, New York, Pennsylvania, Florida, Michigan, Hawaii, Kansas, Kentucky, Massachusetts, Minnesota, North Dakota, and Utah. No-fault allows the automobile insurance holder to regain losses from an accident no matter whose fault the accident was. Technically, theories behind this type of coverage are that most claims can be settled without litigation and without determining whose fault the accident was. Theoretically, no-fault theory would eliminate major costs of accidents and speed up settlement processes. In addition the insurance company would pay you for small claims with the no-fault system. Only for the small percentage of cases that involve large claims will litigation actually happen. The no-fault system also will not reward money to those with injuries due to the accidents. Although several states have resorted to this practice, each state is different in the claims and requirements. For example, some states allow litigation for small claims. These states have a policy close to the traditional insurance coverage.

With no-fault, you may prosecute if the car accident damages go above a certain level, which differs between no-fault states. The certain level is called a threshold. This threshold is usually a dollar amount or a verbal explanation of a type of accident that permits lawsuits. A dollar threshold for no- fault coverage allows the monetary amount to decide whether certain cases are litigated. Claims that do not reach the threshold are dissipated as fast as possible through the no- fault system. Claims that go above the threshold are tolerated and are allowed to be litigated. Concerning a verbal threshold, no specific dollar amount can determine whether the cases can be litigated or not. Instead, the threshold for pressing charges, as opposed to accepting settlement, is explained through words. For example, a vehicle accident ending in permanent physical damage such as a handicap or other permanent health conditions is eligible for litigation.

Much research has been put into the no-fault system versus the traditional system. Researchers have found that consistently in no- fault states, premiums are up to 19% higher than with traditional insurance. For example, research has show than premiums for automobile insurance in the no- fault state of Massachusetts are 37% higher than premiums in California who is still with the traditional personal responsibility system. In 2003, researchers noted the 10 states with the highest automobile insurance premiums. Of these 10 states, 6 states were no-fault states. Since 1989 the state with the highest insurance premiums in the country has been a no-fault system state. In addition to high premiums, research has found that no-fault states have seen an increase in the percentage of speeding drivers, an increase in drivers under 25, more traffic on rural interstates that are considered to be dangerous, an increase in the availability in the emergency medical services, and an increase in alcohol consumption.

Since the declaration of the mandatory no-fault legislation, six states and Washington, D.C. has repealed it. Why? Because no-fault covered twice as many people which is more expensive. Also there were more claims and more fraud as well. Litigation costs were high and lawsuit costs were higher. In addition to no-fault, motorists continued to purchase extra insurance to cover their property. Finally, studies showed that no-fault encouraged reckless driving. Needless to say, these states got their act together and repealed the law. Fortunately, rates and premiums have gone down and the state is not losing as much money. At least someone in government realizes that there always is someone to blame. Someone must take responsibility.

Conclusion

Studies have shown evidence that no-fault systems just do not work. Litigations did not lessen and, in fact, taxes were raised to cover the cost of the new system. As time showed the true nature of this beast, states reinstalled the traditional system, the proven system. Automobile insurance has been around since the 1920s. No need for a new system yet. The old way seems to be working alright for now. At least, we hope.

If you are looking for more information about no fault automobile insurance, put your zip code into the quote box on the top of this page and click “Go”. We will give you an instant auto insurance quote tailored to your specific circumstances. Why not get started right now?

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