No-Fault vs. At-Fault Insurance

No-Fault vs. At-Fault Insurance

Every state in the U.S. except Virginia and New Hampshire requires vehicle owners to carry auto insurance. The insurance mandate ensures that drivers do not need to bear the financial burden of property losses and injuries resulting from car accidents they did not cause.

Insurance systems fall into two categories — no-fault and at-fault. The state’s system will determine whose insurance company will pay for injuries. The system also determines whether accident victims have any restrictions on their right to sue the at-fault driver.

Here is an overview of no-fault and at-fault insurance, including the benefits of each system.

At-Fault Auto Insurance

At-Fault Auto Insurance

Georgia, like 38 other states, uses a fault-based insurance system. In the at-fault system, every accident victim files a claim against the at-fault driver’s insurance. The insurer investigates the accident and pays the claimants if it determines their customer caused the accident.

When you buy car insurance in an at-fault state, your policy will include two types of coverage:

Bodily Injury Liability (BIL)

BIL coverage pays third parties who get injured in an accident you cause. In other words, if you cause a car crash, your insurer will pay those injured in the accident. BIL coverage does not pay you for your injuries.

In Georgia, you must purchase BIL coverage with policy limits of $25,000 per person injured and $50,000 per accident. This means that your insurer will pay up to $25,000 to each accident victim for their injuries. If multiple people were injured in your accident, they must share $50,000, with no accident victim receiving more than $25,000.

Property Damage Liability (PDL)

PDL coverage pays third parties who suffer property damage in an accident you cause. Georgia requires all car owners to carry at least $25,000 in PDL coverage. If you cause an accident, the accident victims must share $25,000 to pay for the repair or replacement of their property.

PDL coverage does not pay you for damage to your vehicle. For you to get paid for your property losses, you must purchase optional collision coverage in your auto policy.

No-Fault Auto Insurance

Insurers in 12 states sell no-fault auto insurance. In these states, like New York and Florida, you deal with your own insurer, regardless of who caused the accident.

No-fault insurance was developed in the 1960s in response to increasing auto insurance premiums and clogged courts. 

Under the at-fault system, insurers incur a lot of overhead expenses because they must investigate every accident to determine fault. Insurers pass these costs on to the consumers.

Additionally, since all car accidents in an at-fault system involve an adversarial relationship, many of them end up in court. This clogged the court systems in populous states like New York and Massachusetts.

As a result, several states adopted no-fault auto insurance over the past 50 years. These states range from less populated states like North Dakota to densely populated states like New Jersey.

When you buy auto insurance in these states, you must buy three forms of coverage:

Personal Injury Protection (PIP)

PIP coverage pays you if you get injured in an accident. You receive these benefits regardless of who caused the accident. In other words, you get these benefits after every car accident, including the ones you cause.

Since you receive PIP benefits regardless of fault, the insurers do not need to investigate the cause of the accident. Instead, they only need to determine whether your injuries resulted from the accident and whether the treatment you received was essential.

PDL

No-fault states still require you to purchase PDL coverage. This protects other road users if you cause an accident that damages their property.

BIL

Many no-fault states also require you to purchase BIL coverage. If you cause an injury accident, the accident victims must look to their PIP benefits first. The law restricts them from seeking compensation from you unless certain thresholds are met. 

In most states, the accident victim can only pursue you for compensation if one of two conditions are met:

  • The victim has exhausted their PIP benefits
  • The victim’s medical expenses exceed a monetary threshold
  • The victim suffered a serious or permanent injury

If the accident victim meets the criteria, they can file a claim against the at-fault driver’s BIL coverage. But unlike PIP coverage, the insurer will investigate the cause of the accident and only pay if the insurer’s customer caused the accident.

Comparison of No-Fault and At-Fault Insurance

The benefits of no-fault insurance include:

  • Faster claim processing
  • Fewer grounds for claim denial
  • Simpler processing for minor accidents

The drawbacks of no-fault insurance include:

  • PIP coverage does not pay pain and suffering damages
  • No automatic right to file a claim against the at-fault driver
  • The system did not lower premiums as promised

The benefits of at-fault insurance include:

  • Automatic right to pursue a claim against the at-fault driver
  • BIL coverage will pay pain and suffering damages

The drawbacks of at-fault insurance include:

  • More grounds for claim denial
  • Slower claim processing
  • Many insurers will drag out the process to frustrate claimants into giving up

Neither system is perfect. But in both systems, there are techniques to put yourself in the best possible position to get a fair settlement. 

To discuss your car accident and the strategies you can use to maximize your compensation, contact Hasner Law for a free consultation.