Fault Versus No Fault Car Insurance

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The Different Auto Insurance Systems: Fault and No Fault

Depending on where you live, you can potentially see wildly different premiums. There are two types of auto insurance systems:

• No-fault
• At-fault

Fault vs. No-Fault

The difference between fault and no-fault is that, under no-fault, the drivers file their claim with their insurance company. No-fault states do not even determine who was at fault in the accident.

Under no-fault states, drivers are usually forbidden to take one another to court except in a few rare circumstances. These circumstances are typically related to the need for fault to be determined due to exceptionally high medical bills or property damage caused by the collision.

The fault auto insurance system, also known as tort auto, allows drivers some options after an accident occurs:

• The driver can file a claim with their car insurance provider
• The driver can file a claim with the at-fault driver’s vehicle insurance company
• The driver can file a personal injury lawsuit against the at-fault driver

The tort auto insurance system is the most common. The person driving the vehicle who is deemed at-fault for the collision or accident is required to pay for the costs of the accident. Depending on the state where you live, the way of determining who’s at fault for the accident will vary.

The benefits of no-fault auto insurance is:

• Productive payment of claims
• Low legal involvement
• Lowered insurance premiums

The downsides of no-fault auto insurance is:

• You can only sue under certain circumstances
• There is no incentive to be a safe driver (aside from policy premiums)
• Insurance fraud is prevalent in no-fault states
• Premiums in some cases are higher