While many states follow the Financial Responsibility law, there are those who implement the No Fault law and is commonly referred to as Personal Injury Protection (PIP). This type of coverage is intended to ensure that their is compensation for the policyholder and/or passengers in the event that they are injured as a result of a traffic accident.

Unlike liability policies, the insured’s company will pay for medical expenses and loss of wages resulting from a collision regardless of who is found to be responsible for the collision. In addition, no fault personal injury protection was developed with the intention of keeping accident related cases out of courtrooms. States that abide by the financial responsibility law have found that there has been a backlog in the court system and excessive costs and resources used to determine which party is liable in order to disperse compensation to the appropriate party.

Understanding No Fault Car Insurance

Consumers should be aware that Personal Injury Protection does not cover any damages to the policyholder’s vehicle or injuries that they may cause to other parties. For example, the Florida auto insurance requirements for motorists dictates that they must have an active policy of $10,000 for PIP and $10,000 for Property Damage liability. Property damage liability will cover the damages to another’s property in which the insured has caused as a result of a traffic accident involving their automobile.

Every “No Fault” state has a different set of minimum limits and required coverage which is necessary in order to operate legally. An example would be the difference in requirements between Michigan and Florida. MI requires residents to carry Property Protection (PPI) and Bodily Injury Liability. PPI pay up to $1 million for damages that a policyholder causes to the property of others such as buildings and fences. It may however pay for the damage of another vehicle if it is properly parked.

Although the no fault law was intended to protect the insured from lawsuits, there are certain exceptions where policyholders can be sued in the event that they cause an accident within the state that results in the death of another party or if they are seriously injured and/or if they cause a collision in other states; these incidents would be covered under a Bodily Injury policy. This is a required coverage in Michigan but is optional in FL. If a resident of a no fault state, one should take the time to become more educated on the required policies in order to make sure that they are properly protected and avoid financial burdens from lawsuits or obtaining inadequate policy limits.