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The pros of no-fault insurance are that it ensures quick claim payouts after an accident and reduces the number of lawsuits for minor injuries. The cons of no-fault insurance are that it raises car insurance premiums and makes it difficult for drivers to receive compensation for pain and suffering.
Pros and Cons of No-Fault Insurance
- Quick payouts: Because fault doesn’t matter with no-fault insurance, drivers can have their medical claims paid quickly after an accident.
- Fewer lawsuits: No-fault insurance means that insurers don’t have to spend as much money on litigation and can pass the savings to customers.
- Broad coverage: No-fault insurance covers a wide range of expenses in addition to medical bills, including child care and household services.
- Higher premiums: No-fault states have higher insurance premiums than tort states because more coverage is required and fraud is more prevalent.
- Limited legal options: Drivers in no-fault states can only sue the at-fault driver if they are seriously injured or incur significant expenses.
- Fewer penalties for at-fault drivers: Negligent drivers face less of an insurance penalty when they injure someone in an accident.
- More traffic deaths: No-fault states have higher traffic fatality than tort states.
When No-Fault Insurance Is a Driver’s Choice
In nine of the 12 no-fault states, the no-fault system is mandatory. Three no-fault states – Pennsylvania, Kentucky and New Jersey – allow you to opt out, though. This means that you can be granted the unlimited ability to sue an at-fault driver after an accident, and in Kentucky you can reject personal injury protection altogether. If you live in one of these so-called choice no-fault states, you can weigh the pros and cons of the no-fault system in order decide whether to opt out.
On the other hand, if you live in one of the eight tort states that require PIP or offer it as optional coverage, you can get some benefits of no-fault insurance while still being able to sue the at-fault driver in any circumstance. Additionally, several states either require or offer medical payments insurance, which works similarly to PIP but does not provide as much coverage.
To learn more, check out WalletHub’s guide to no-fault insurance.
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