Fault and No-fault Auto Insurance – Which Is Better

Comparing No-Fault to Traditional Insurance

In spite of the strong opposition to no-fault auto insurance mounted by trial lawyers, soaring auto insurance premiums are causing a number of states to take another look at their liability insurance system. A recent poll of New Jersey motorists in American Automobile Association (AAA)-affiliated auto clubs revealed that nearly 70 percent favored adoption of a verbal threshold, while 77 percent viewed the auto insurance system in the state as a “very serious” problem, more serious even than crime.

A 1985 U.S. Department of Transportation study of no-fault auto insurance based on more than a dozen years of accident records in 24 jurisdictions, reached a number of conclusions indicating that those injured in traffic accidents are better off in states with strong no-fault laws.
The report said significantly more motor vehicle accident victims receive auto insurance compensation in no-fault states than in other states. Almost twice as many crash victims per 100 received personal injury benefits in states with no-fault laws than received compensation in traditional tort liability states. This was the case regardless of whether states had adopted the restricted lawsuit or add-on form of no-fault. Compare direct auto insurance quotes.

Compensation payments under no-fault insurance are made far more quickly than under traditional auto insurance, according to the report. (Most no-fault laws require insurers to pay victims within 30 to 60 days after they submit proof of their claims. By contrast, in tort states victims must wait months or even years for compensation.)

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The average amount of compensation available for payment to personal injury victims in no-fault states is greater than that in traditional liability states. No-fault states offer nearly double the amount of compensation than that offered in liability states. Find direct auto insurance quotes.

As for catastrophically injured victims, although typical auto insurance benefits in both no-fault and traditional liability states fall short of meeting all their financial needs, the report said, no-fault states come far closer to meeting these needs than do traditional states. In the first place, no-fault limits are typically higher than those of fault states.

Also, in liability states recovery is usually limited to the liability insurance limits of a policy, which can be as low as $10,000. In no-fault states, besides recovering first-party benefits, an injured person may receive benefits under the liability system when the no-fault limits for benefits have been reached. Get direct auto insurance quotes.


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