By Liz Kim, Boston MA
Most states require that drivers carry auto insurance on their vehicles by demonstrating some proof of insurance when a vehicle is registered. Certain aspects of regulated insurance coverage involve a concept known as “no-fault” insurance. This is coverage that is required to pay for damages to a specified party regardless of fault. In the U.S., this concept is mostly applied to Personal Injury Protection (PIP) coverage otherwise known as medical payments coverage.
Insurance requirements are set by each individual state, so the requirements vary. There are only a couple of states that do not require any auto insurance, but most do and most have set their own minimum limits. Minimum limits are the least amount of liability insurance you can buy and still register the vehicle.
Liability limits are the limits that apply to bodily injury and property damage. These are damages that you as a driver might inflict on another if you cause an accident. The policy pays others on your behalf in the liability section of the policy, up to a specified limit, which can be determined by you. The higher the limit, the more your insurance coverage will cost. Under compulsory auto insurance laws, minimum limits are established by state laws to make sure that you have some coverage.
Compulsory auto insurance laws are also known as financial responsibility laws. They are designed to ensure that those who cause accidents have the means to pay for injuries or damages they inflict on others due to their negligence. In some states, self-insured people or corporations can operate a motor vehicle if they can demonstrate that they have assets available to pay claims on their own if they cause an accident.
Originally, financial responsibility laws were mostly concerned with the payment of medical bills. They now require coverage that applies not just to medical bills, but also to pain and suffering. In some states, there is a requirement to carry medical payments coverage or PIP coverage in addition to minimum limits for bodily injury liability and property damage liability. The PIP requirement was established to make sure that everyone in a vehicle has medical benefits available to him or her regardless of who caused the accident. This has been traditionally known as no-fault insurance because it pays regardless of fault.
The main argument in support of a no fault PIP coverage requirement is that an accident involving injuries could cause a financial hardship for many because of increasingly high costs of medical care. If an accident occurs with you, and the accident is not your fault, you would be in a position to pursue the coverage afforded by the other driver’s insurance to cover your medical bills. In most states, there is no obligation that they step in and take over your medical payments carte blanche. In fact, they may find that their insured was only partially liable and agree to pay only a percentage of your damages, leaving you with the balance. If they disagree entirely with your assessment of liability, you may have to hire an attorney to sue the other driver if a suitable agreement cannot be reached. All of this takes time and is difficult for an injured person to manage. Many states have enacted no fault PIP laws to circumvent this problem.
Compulsory auto insurance laws are designed to protect motorists who may be injured in a car accident by guaranteeing that funds will be available to compensate them at least partially when an accident occurs. Although not every state participates in such laws now, the trend appears likely to continue as there are some very valid points made in support of financial responsibility laws.
