Fault And No-Fault Auto Insurance – What’s The Difference?

No-Fault Auto Insurance

If you are covered under No-Fault Auto Insurance, your insurance company will cover their damages no matter who is at fault.

A discussion of no-fault insurance would be incomplete without reference to the philosophical and social issues involved in decisions about how people are to be compensated as a result of auto accidents. Our fault-based liability system comes out of ancient English common law; it developed in America at a time when life was far less congested and technologically sophisticated, a time when it was often easier to make a clear decision about a persons being at fault or not at fault in an accident.

The system also was developed at a time when there was no liability insurance and when making those found negligent pay for the damage they caused actually imposed a financial penalty on those individuals and thus served to deter irresponsible actions. Today, this financial penalty has been greatly reduced; it is not the negligent individual who pays most of the cost of accidents, but all who share the risk through liability insurance.

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Some penalty remains in the liability insurance system, because drivers who cause accidents typically are charged a higher rate. Given the congestion of our roads now (even rural areas have rush hours), the speeds at which automobiles travel, the role of bad roads and bad weather in many accidents, and the potential for car wrecks and injuries from relatively minor driving mistakes, there is a serious philosophical question as to whether a fault-based system—with its emphasis on individual fault—really reflects the reality of the majority of auto accidents. Compare direct car insurance rates now!

Furthermore, the tort liability system itself involves significant trade-offs. It is understood that the system is very slow, that much of the money expended does not reach the victims of accidents, that compensation is not guaranteed, and, on the other hand, that some victims may be greatly overcompensated.

These trade-offs are believed by some to be worth it to achieve the objective of identifying those who are negligent and making them pay. Increasingly, however, many question whether these trade-offs are worth it, particularly when, as the system is today configured, it is not actually the negligent parties who pay, but all insured drivers, and when no-fault may be the better alternative.

In deciding where they stand on the issue of no-fault, public policymakers and consumers need to consider the philosophical and social issues, including what the objective of the public policy should be (prompt, adequate compensation vs. making the guilty “pay,” for example), how much compensation is appropriate (clearly, some no- fault laws do not provide sufficient benefits to enable people to avoid bringing lawsuits, while some lawsuit plaintiffs can recover excessive amounts), and what is the most efficient and cost-effective means of achieving the social goals. Get direct car insurance online!

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