The Pros and Cons of No Fault Insurance

January 27, 2012

The system known as "no fault insurance" was originally supposed to lower auto insurance rates. However, reports from some states that use no fault systems show that no-fault really isn't working as well as it was supposed to, at least when measured by this standard. Under no fault insurance, when a driver is in an accident, his or her own insurer pays the cost, regardless of who was at fault in the collision. This replaces a more straightforward driver-liability system with something where insurers have to do some complex math to set premiums, often confusing and angering auto insurance buyers. Here are some tips for dealing with no fault insurance policies.

  • Compare no-fault and other options - look at how no fault insurance rates stack up to the competition in your state or other states.

  • Look at adding PIP - PIP or Personal Injury Protection is one element of no fault policies that is often optional. Looking at these optional elements can help reduce costs at purchase.

  • Ask about "accident forgiveness" - part of the high cost of some no fault policies is based on algorithms for showing "risk" for a driver. These can kick in at purchase, or later, when a claim is filed. When you talk to a rep about accident forgiveness, they will explain to you more about how the system works, and possibly get you closer to some better rates for your no fault policy.

  • Talk about "tort" options - some states also have various options for the amounts a driver could seek after an accident. Re-arranging these can help get you lower no fault premiums.

Keep these items in mind when discussing your no fault policy with an insurer.

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