UPDATED: Mar 13, 2020
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A no fault state is a state which requires all insurance policies for vehicles to be managed on a no fault basis, what this means is that the insurance company will pay benefits to the policy holder in the event of a valid claim – irrespective of which party is at fault in regard to causing the accident.
When a claim is settled on this basis, it does not mean that fault is not apportioned and liability remains undetermined, it is. What it means is that this fault does not affect the payment made under the policy.
In fact for the party who is deemed to be the victim of an accident, their insurer will pay them benefits under their insurance and their premiums will not rise in the future – because they are not deemed to be an additional risk in the future.
For the party who is found to be to blame their insurance company will also pay out any benefits due under their insurance policy, but their premiums will increase because they now represent an additional risk to the insurance company.
While in individual cases this may seem unfair to a victim’s insurer in that they incur losses for which they cannot compensate with increased charging in the future, this system is intended to balance this exposure over a number of claims so that an insurer will have roughly half of their losses from victims and the other half from culprits, who will be charged increased premiums to offset these losses.
Which states are no fault states for US auto insurance?
There are 12 states in the United States which allow or require auto insurance to be administered on a no fault basis, included in this there are 3 states which require auto insurance purchasers to be given the option of purchasing insurance on a no-fault basis and the Commonwealth Territory of Puerto Rico also requires auto insurance to be on a no fault basis.
The 12 states which operate/allow no fault policies:
- New Jersey
- New York
- North Dakota
And the three states which require an insured party to be given a choice of operating on a no-fault basis are:
- New Jersey
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Additional Definitions On The Web For “No Fault State”
- Wikipedia – Most U.S. states have a “traditional tort” liability system for auto insurance in which recovery is governed by principles of provable negligence. However, twelve U.S. states and the Commonwealth territory of Puerto Rico require policyholders to operate under a “no-fault” scheme in which individuals injured in automobile accidents are limited in their ability to seek recovery from other drivers or vehicle owners involved in an accident…
- ThePanjInjuryLawyers.com – Pennsylvania is one of 12 states in the U.S. that follows no-fault insurance rules for drivers. This means that regardless of who caused your car accident, each individual’s insurance company pays up to the minimum amount of coverage for their damages. This process was done to reduce the amount of personal injury and property damage lawsuits that arise from car accident claims…
- CarsDirect – No fault auto insurance is a term used to describe insurance plans in certain states that pay benefits to policyholders, and sometimes their passengers, regardless of the party responsible for the accident. This type of coverage is auto insurance law in Puerto Rico and nine participating states including Florida, Hawaii, Kansas, Michigan, Massachusetts, Minnesota, New York, North Dakota and Utah…