What is "no-fault" insurance?

No-fault insurance is a system adopted in some states that essentially bypasses the conventional legal procedure which finds fault in an accident. (This is the procedure by which you hire a lawyer, file suit and possibly go to court to prove the accident was the other guy's fault.) No-fault simply does away with the concept of one party or the other being at fault. There are no lawyers, no court, no judge, no jury, no lengthy lawsuits against the other party. This is considered beneficial to taxpayers, because it eliminates costly legal proceedings that the state must manage, and to insurance policyholders, because it helps keep rates down.

If you are insured in a no-fault state and have an accident, you don't go after the other driver. You contact your own insurer and file a claim. Your own insurance policy guarantees you immediate compensation for damages, medical expenses, lost wages, etc.

The type and range of no-fault coverage varies by state. What defines the limitations of no-fault policies can differ in two critical areas:

Threshold—The type of damage/injury or the cost of repair/recovery that triggers the need for legal action.

Mandated Benefit Level—The package of benefits (medical, wage loss, replacement services and other expenses) your state requires you to carry.

The details of no-fault insurance can be complicated. Contact your Trusted Choice^SM agent or your state's insurance department for further information.

Do all states require some kind of liability insurance?

No. Some states, while not mandating auto insurance, have "financial responsibility laws" that require all drivers to be able to pay for any damage or injury they may cause. However, carrying liability insurance is still the best way for you to meet your state's financial responsibility requirements.

UM and UIM policies are offered by law in all states, including no-fault states. In fact, some states require all motorists to carry this coverage to gain protection from inadequate insurance coverage of other drivers.

What happens if I have an accident with an uninsured driver?

First, call the police to the scene to be sure all pertinent information is properly recorded. Your nerves will be shaken right after an accident, and it helps to have a calm and knowledgeable person walking you through the necessary details.

Then, contact your Trusted Choice^SM agent immediately and ask about filing a claim. If you followed all the recommended guidelines when you bought your policy, you should be covered within the limitations of that policy. Remember, your insurance policy is designed to protect you.

If the cost of your damages or injuries exceed the amount your policy will pay out, it may be time to take legal action against the other party. Even if you have no-fault insurance, sometimes the only way to be compensated is to place blame and responsibility where it belongs.

Why would my insurer cancel my policy?

Technically, in most states your insurer can cancel your policy only if:

     you fail to pay your premium;
     you lose your driver's license;
     you are guilty of material misrepresentation during the application process (i.e., you fail to
         notify your insurer of a recorded violation such as a drunk-driving offense); or
     you fail to report a substantial change of risk, such as buying a high-powered sports car
         to replace a family sedan.

However, your insurer can choose not to renew your policy for a variety of reasons.

Do you have a bad driving record? Have you received a lot of speeding tickets? Have you ever been caught driving drunk? Not only are these scenarios considered unsafe and illegal, they are justifiable cause for your insurer to label you a bad risk and refuse to renew your policy. (Some insurers may feel compelled to cancel policies after only one accident.)

Where do you live? Has the neighborhood changed in the last few years? Have the accident or crime rates risen noticeably? As regions are reassessed periodically, their status could change and you could suddenly find yourself living in a high-risk area where your insurer's rates may not be adequate to cover losses.

What do I do if my insurer cancels or refuses to renew my policy?

Even "good" drivers can be dropped by their carrier. Reasons range form a "drinking while driving" violation or other serious violations (that make you a high risk) to situations outside your control, such as when insurers in your state are suffering severe business losses. Overall rises in claims or losses can cause insurers to become highly selective in determining whom they can afford to insure.

If you are licensed to drive, by law, you are eligible for insurance. However, your options for new coverage may be limited. Each state has created and regulates a market of last resort for those who cannot otherwise obtain coverage. These groups have various names, depending on the state you live in, such as “assigned risk” plans or the “residual market.” Your Trusted Choice^SM agent will know more about the particulars in your state.

Regardless of the reason you were dropped, you need to act immediately to get a policy. Under no circumstance should you drive your vehicle without insurance. Call your Trusted Choice^SM agent to help you find new coverage. If you do find yourself in the residual market, the price may be higher but it may be your only alternative in maintaining your freedom to drive.

How do I keep my insurance company from canceling my policy?

The most obvious way to maintain your low-risk status is to keep a clean driving record. If you've been in an accident, consider taking a defensive driving course. Even those of us who have been driving for years rarely know the simple tricks to preventing accidents through defensive driving.
Also, look into purchasing special safety and security features for your car, such as anti-lock brakes and an alarm system. Your Trusted Choice^SM agent can give you further tips on how to convince your insurer you're a safe driver.

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Date Posted to Site:   Nov. 2003

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