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Auto Insurance - No-Fault Explained

By Compuquotes Team on March 27th, 2008

Auto Insurance

No-fault insurance is designed so that victims of an auto accident receive monetary compensation from their own insurance company for any damages that occur as a result from a collision. The insurance company is basically responsible for the damages to their own clients without regard to whose driving negligence caused the accident.

This system avoids many delays that are found in the fault system because fault doesn't have to be proven. Parties involved no longer have to wait months, or even years to receive benefits when they are the victim of a collision.

In addition to quick victim recoveries, the person primarily responsible for fault can also have their damages paid for. Not only can their receive reimbursement for hospital cost, they can also receive lost wages.

There isn't a general need for lawyers in this no-fault system which saves time and money during a long settlement process.

Victims of accidents receive benefits that cover a wide range of losses. These can include medical expenses to a limit as defined in the policy, as well as rehabilitation expenses if necessary. They also include a proportion of lost wages, payment for essential services including housework and home maintenance. In the event of a death, victims can receive benefits for funeral expenses, as well as payments to survivors of those killed in the accident to compensate for the loss of a family member.

In common no-fault systems all benefits must be paid within 30 days of providing the insurance company appropriate proof of loss. Customers may buy additional coverage to raise the total amount of medical bills and lost earnings that will be compensated. There is often a reduction in compensation benefits if the injured person also receives benefits from Social Security disability or workers compensation.

Of course there are negatives involved in such a system. You are forced to give up a few things for an insurance company's agreement to compensate you immediately for covered losses. In most no-fault states you lose the right to be monetarily compensated for your pain and suffering in most circumstances.

Many states have limits on the total of compensated wages per month, some even as low as $1,000. They also tend to under-compensate hugely when it comes to out-of-pocket expenses.

In a no-fault state you basically lose the right to sue someone unless your injuries are severe. You are probably not going to receive full compensation for your losses.

Every state that is no-fault permits those who are badly hurt to bring suit under the fault concept. The threshold is the line that divides cases where no-fault applies from circumstances where lawsuits are permitted.

A verbal threshold is one where the right to sue is dependent upon the nature of the injuries. To be able to sue in a verbal threshold state the victim must suffer serious impairment of body function, permanent serious disfigurement, or death.

A monetary threshold is based on a whether the cost of medical treatment exceeds a base amount established in the no-fault law. In such a case the victim is able to sue based on fault.

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