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Fault vs No-fault Auto Insurance: Differences

In the United States, auto insurance is a basic requirement for a car owner. In case of accidents, auto insurance provides protection against losses in road accidents and from liability incurred as a result of the accident.

In California the following types of insurance coverage are offered:

• Insurance for bodily injury liability – this provides coverage for bodily injury claim from people you may injure in accidents
• Insurance for property damage liability – this covers property damages to third parties
• Insurance for medical payments for owner and other passengers
• Coverage for damages to one’s car – these often include collision coverage or a comprehensive coverage which covers non-collision physical damage to your car
• Uninsured/ underinsured motorist bodily injury insurance – this covers expenses injuries that you or your passenger may incur from an accident caused by a driver without any insurance. Without this insurance, you will not receive compensation from an uninsured driver at-fault in an accident.

Under the state law, the mandatory minimum coverage includes the following:

1. Bodily injury/ death liability of one person - $15,000
2. Bodily injury/ death liability of two persons - $30,000
3. Damage to property - $5,000

Differences between Fault and No-fault Auto Insurance

Determining fault in a car accident is often determined by state laws. Most states implement the fault based system while other states have the no-fault system.

In fault states, insurance companies pay victims according to each party’s degree of fault. Fault-based states operate under the tort liability system of auto insurance. In fault states, a victim may file suit for damages such as medical expenses, lost wages, and non-economic damages such as pain and suffering.

In some states like California, punitive damages may also be awarded in extreme cases.

On the other hand, in no-fault states, a driver does not have to prove the other party negligence before he can claim compensation. His insurance company answers the medical expenses, rehabilitations, and lost wages, depending on the amount of his coverage. Hence a no-fault insurance is also called as Personal Injury Protection or PIP.

In a no-fault system, the injured victim cannot sue the state nor the other driver for pain and suffering or emotional distress. In other words, in this type of insurance, benefits are paid regardless who caused the accident.

However, in some no-fault states, a victim may sue the negligent party for damages not covered by the victim’s insurance or for expenses that exceeds the amount covered.

In comparison, both types of insurance coverage have their own merits. The fault auto insurance has its advantages similarly with the no-fault insurance, in the same manner that both insurance policies ensure the compensation of a vehicle accident victim.

To help you decide which auto insurance policy can give you the best liability coverage, you need to consult with a knowledgeable auto accident lawyer.