What is a fault vs. no-fault state?

Automobile liability insurance is mandatory in America, but the types vary by state. In general, there are four types of car insurance including no-fault, choice no-fault, tort liability (fault) and add-on.

Depending on your state's laws and the types of insurance you have purchased, your right to sue following a car accident may be restricted, and the policyholder's insurer may be responsible for paying first-party benefits, regardless of which driver was at fault for the motor vehicle accident.

What is no-fault insurance?

The goal of no-fault insurance is to lower the cost of insurance by removing the ability of the drivers to sue for minor claims. In no-fault states, the policyholder's insurance company will pay for the damages in an accident, regardless of which driver is at fault.

In no-fault states drivers may retain the right to sue for non-economic or general damages, but only if and when those damages exceed a certain threshold. For instance, some states will have a monetary threshold, such as a minimum of $300,000 in damages, and others will have what they call a "verbal" threshold, allowing claimants to sue if their injuries are considered serious.

There are twelve states which have no-fault car insurance: Florida, Michigan, New Jersey, New York, Pennsylvania, Hawaii, Kansas, Kentucky, Massachusetts, Minnesota, North Dakota, and Utah. Although all of these states are no-fault states, there are three (Kentucky, Pennsylvania and New Jersey) which allow the drivers to decide or choose if they want to retain the ability to sue (without statutory limitations) or choose a no-fault system policy.

Other states such as Michigan have a more complicated insurance scheme in which they require drivers to purchase a PIP or Property Protection Insurance policy which pays for the damage to the driver's car regardless of fault, and both the District of Columbia and Puerto Rico also have some form of no-fault insurance.

What are At-Fault Insurance Policies?

Liability insurance or at-fault insurance will pay for the costs and expenses of bodily injury and property damage against a third party due to a driver's actions, which could be negligent. States require all drivers to either have car insurance or provide proof that they have sufficient resources to pay the minimum costs set by the state. Depending on your state, you may have to post a bond. There are a variety of additional coverage options for drivers including collision coverage, comprehensive coverage, and uninsured motorist coverage.

In an at fault state, if you injure another driver due to your negligent driving actions the injured party may have the right to sue you by filing a car accident insurance claim. Liability coverage can shield you by paying your legal defense costs and paying for any bodily injury and property damage costs for the plaintiff.

What if you are injured due to the negligent actions of another driver? If you live in an at fault state and the driver does not have sufficient coverage to pay for your medical bills, lost wages and pain and suffering, you have the legal right to file a car accident lawsuit against them.

If you live in a no-fault state your insurance company will compensate you for your injuries. If, however, the compensation from the insurance company is insufficient because the injury is very severe or the costs of medical care is above the state's monetary thresh hold, you may also retain the right to file a car accident claim against the negligent driver.

Due to the complexity of state laws it is always best to talk to a car accident lawyer for more information.