How Does No-fault Car Insurance Work?

pennsylvania no fault insurance statePennsylvania is a choice no-fault car insurance state. In a no-fault insurance system, a driver typically seeks compensation from their own insurance company to cover expenses related to injuries suffered in an automobile accident. This article will explain the basics of a no-fault insurance system as well as the potential legal ramifications of selecting various no-fault insurance options.

What Is No-fault Car Insurance?

In Pennsylvania, drivers have the option to choose between no-fault insurance and traditional automobile insurance. The difference between no-fault insurance and regular insurance is the right to sue the driver responsible for the accident. Choosing no-fault coverage only limits the amount of compensation you can recover for bodily injury. Minimum coverage levels are established by the state of Pennsylvania; you can of course choose to increase your insurance coverage levels by paying a higher premium. The premiums for no-fault insurance are typically about 15% lower than traditional insurance. You can opt out of no-fault coverage and pay a higher premium while giving yourself the right to sue, but you also open yourself up to potential lawsuits from other drivers. No-fault insurance does not apply, however, to property damage. This means that the driver who caused the accident may be liable for any possessions that were damaged in the process. Even with a no-fault insurance policy in place, you can still sue and be sued to recover these damages.

Pennsylvania Is One of 13

pennsylvania no fault insurance minimumsNo-fault insurance was developed ostensibly in order to reduce the number of expensive personal injury claims that are often filed as a result of an automobile accident. Suits that seek compensation for “pain and suffering” can, depending on the circumstances, result in big awards to the plaintiff. These big awards then often equate to large payouts by the insurance companies. The potential for limiting these payouts was one big reason why the insurance companies support no-fault insurance regulations so strongly. By limiting the amount of damages in automobile accidents, the insurers can lower their costs — and increase their profits. By the mid-1970’s, with plenty of support for no-fault insurance, 24 states had implemented some version of the no-fault system. Since then, a number of states have repealed their no-fault automobile insurance law. Today, 12 states and the District of Columbia have no-fault laws, in one form or another, in place. Pennsylvania is one of them.

Pennsylvania Insurance Minimums

Pennsylvania has established minimum amounts of liability coverage for all drivers. These amounts are as follows:
  • $15,000 personal injury per person for third parties, which includes passengers, other motorists, pedestrians, and anyone else who might be involved in an accident
  • $30,000 total personal injury protection for each accident for third parties
  • $5,000 of property damage protection, per accident
  • $5,000 in no-fault personal injury protection
The personal injury protection, or PIP, covers a claim made by the insured for injuries suffered in an accident, regardless of who caused it. A PIP claim is made to the insured party’s own insurance company. Even though a PIP claim is made under Pennsylvania’s no-fault statute, a no-fault personal injury claim does not prevent the insurance company from raising the insured party’s premium.

Pros of No-fault Car Insurance

no fault insuance premiumsNo-fault insurance programs were developed to help contain the costs of rampant, high-dollar automobile accident insurance claims. Drivers who opt in to the no-fault program essentially sign away their ability to sue, while also protecting themselves from a lawsuit under some conditions. No-fault insurance also facilitates faster claims processing by the insurance companies. Because it is a streamlined system, in a no-fault claim there are virtually no disputes or claim rejections. Since the insurer does not have to worry about potentially costly and time consuming litigation, accident cases are settled and everyone can move on.

Cons of No-fault Car Insurance

Arguably the biggest downside of no-fault insurance is that your insurance company pays the bill regardless of who caused the accident. This can result in an increase to your premiums since the no-fault option does not protect your premium rate calculation. Ultimately, the typically lower costs of a no-fault insurance policy can increase significantly over time — depending on your accident history — and might ultimately wind up costing you more than a standard automobile policy. Furthermore, except in cases of very serious injury, you cannot sue for pain and suffering for anything above the state coverage limits. The term serious injury, in this context, is defined as death, serious disfigurement, or loss of movement. Injuries such as broken bones, painful treatments, or relatively minor cosmetic injuries, even if they are clearly visible, cannot be the basis of a lawsuit.

Tort Options and What They Mean

uninsured driver no insuranceUltimately, it comes down to an option you have when purchasing insurance — full tort or limited tort. The word ‘tort’ is a legal term that refers to civil wrongdoing. In civil law, tort refers to an act by someone that wrongfully causes injury to another party. When purchasing automobile insurance in Pennsylvania, by selecting the limited tort option, you are choosing no-fault coverage. In return for a lower premium, again approximately 15% less, you are signing away your right to sue for pain and suffering unless you have suffered a serious injury. It is important to read the fine print of your insurance policy so that you are crystal clear on how the insurance company defines serious injury. Taking the full tort option will invariably result in a higher premium. However, you will still have the right to sue for pain and suffering in court for all damages that occur in an accident. In addition, you would be able to seek compensation for unpaid medical bills, property damage, and loss of income as well. Both full tort and limited tort options only apply in situations where the driver or passengers have been injured and it’s not the driver’s fault. It’s also important to remember that choosing the full tort option also exposes you to the potential of an accident-related lawsuit as well.

Is No-fault Car Insurance the Right Choice for You?

When purchasing automobile insurance in Pennsylvania, many people base their decision purely on the cost of the monthly premium. In this case, no-fault insurance will typically be the choice since it is clearly less expensive. Additionally, many people purchase their automobile insurance believing that they will never need it — that they won’t have an accident. That can be a mistake. If you have an automobile accident, things can become very complicated and very expensive, very quickly. This is where having sound legal advice is important. If you have an accident, consider speaking with one of the lawyers at Donaghue & Labrum. We can help you understand what your insurance policy covers and doesn’t cover. We can help protect you from any additional liability, and most importantly, we will work hard to ensure that you can recover all of the costs and expenses that you are entitled to.