A no-fault – in its true form – insurance policy covers a risk regardless of who was at fault in an accident. There is, however, no such policy in the United States and what is often referred as “no fault insurance” is, in fact, a hybrid limited-tort policy.
A more common no-fault insurance policy asks you, as the policyholder, to carry part of your own medical expenses on your insurance. Unlike, Tort auto insurance, if you are involved in a car accident, your insurer will take care of the medical bills whether or not you were at fault.
The purpose of the no-fault auto insurance is to make sure that everybody gets immediate medical treatment in the event of an accident. A lot of full-tort states complain about lengthy trials where injured people go after the at-fault party but have to pay for their hospital bills on their own, so this is where the no-fault system comes in handy. Medical expenses are covered immediately if you are injured in an accident and the insurer will then go after the at-fault party.
Two of the most common forms of no-fault protection are:
- PIP – Personal Injury Protection – covers the medical expenses of the driver and the passengers in the event of an accident, regardless of who caused it;
- OBEL – Optional Basic Economic Loss – is offered to New York residents and provides an extra $25,000 worth of coverage for injuries and lost wages. It applies to the policyholder, as well as passengers and pedestrians injured in a car wreck.