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What is no-fault car insurance?

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Quick Answer

No-fault car insurance is a type of insurance product that covers damages sustained in a car accident without regard to which driver caused the damages, notes Nolo. When default is determined, the at-fault party's insurance company reimburses the other insurance company for compensation paid. No-fault insurance is available in the District of Columbia and 11 states: Florida, Kansas, Hawaii, Kentucky, Michigan, Minnesota, New Jersey, North Dakota, New York, Utah and Pennsylvania.

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The biggest benefit of a no-fault policy is that drivers don't have to wait for a lawsuit to be settled or for the insurance company to determine fault in order to start receiving benefits under the policy, notes Nolo. For example, car repairs and car rentals are much more streamlined, and medical treatment can be sought immediately without worrying about who will pay for it. In addition, the driver is not left trying to prove who is at fault in the accident.

However, there are limited compensation options for no-fault drivers, advises Nolo. In some states, the ability to collect damages from the negligent driver is limited to only those accidents where medical bills meet a particular threshold or where significant injury results. Generally, pain and suffering damages are not awarded to those involved in accidents who are covered under no-fault policies.

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