What is No Fault Insurance?
A no fault insurance policy, also known as Personal Injury Protection (PIP) insurance policy, automatically pays for your medical bills, lost income and some injury related expenses, regardless of whether you caused the car accident. The amount of money you get depends on your PIP benefits limits, which are listed in your policy declarations page.
Not all states require you to carry a no fault insurance and each one has different policy limits. You should check your states PIP limits so you know the amount of your benefits.
New York is a no fault state which offers the following PIP benefits:
- $50,000 for a basic PIP coverage.
- Pays for 80% of your lost wages from work and up to a maximum of $2,000/month for three years.
- Up to $25/day for replacement costs for one year. These cover costs that you may have to pay as a result of your car accident like hiring a cleaning lady, baby sitter, transportation expenses etc.
- A $2,000 death benefit for people listed as beneficiaries under your PIP benefits. This could be for your parents, spouse, or children.
Benefits of No Fault Insurance
The biggest benefit of having a no fault policy is that you are guaranteed to receive money (up to your policy limits). In fault states, the amount of money you get is never guaranteed because it depends on how much you can prove the other driver was at fault for your car accident.
This can be extremely frustrating because you have to collect evidence against the other driver and go through the process of filing a car accident claim against another driver’s liability insurance.
Another advantage of having a PIP policy is that you get your money more quickly. This is because you are dealing directly with your own insurance company rather than another driver’s policy provider.
The auto accident settlement process against another insurance company can take anywhere between several months to years to complete. This would mean that you would have to wait until the end of the car accident settlement before receiving a check for your medical bills and lost income.
Here are some other benefits of having a no fault policy:
- You don’t have to pay a high deductible for your medical expenses.
- You get your medical bills paid faster.
- Your lost wages are covered.
- You don’t have to prove someone was at fault for your car accident.
- You cannot be sued if you caused an accident.
- You save time by not filing a car accident claim.
- You save money by not hiring an expensive personal injury lawyer.
However, your PIP benefits only cover up to your policy limits. If your medical bills are more than your policy limits, then you will have to start a car accident claim and follow the same procedure as if you lived in a fault state.
This is one of the many disadvantages of no fault auto insurance.
Things to Watch for in Your No Fault Insurance Policy
Under your no fault policy, your insurance company has certain rights in how it handles the payment of your benefits. You should read these rights because it will impact the final amount you end up getting from your no fault insurance.
There are two types of rights insurance companies have under a no fault policy:
Right of Reimbursement
Under some PIP policies, your insurance company has a right to be reimbursed for the amount it paid you. In other words, the amount of money you get from your car accident settlement will be reduced by whatever your no fault insurance already paid you.
Right of Subrogation
Under other PIP policies, your company cannot go after you but does have a right to seek reimbursement from the other drivers insurance company. This is known as a right of subrogation.
Under these subrogation rights, the damages you can collect from the other driver’s liability insurance will not include any amounts already paid by your PIP benefits. This prevents you from receiving the benefits twice.
You should always read your PIP policy carefully to see if your insurance company has a right or reimbursement or subrogation. This way you can assess how much money you will get in the end.
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