February 23, 2012

How Different Types Of Fault Affect Automobile Insurance Claims

Car insurance, much like many other forms of insurance in the States, has been increasing for the last few years. There rate of accidents is climbing, more teens are driving than ever before, and the overall cost and risk that insurance companies take is also on the rise. As a result, states have changed some of their driving laws and laws related to car insurance, making it more costly for some than for others. Since automobile insurance is a state mandated and state run program, the laws vary from state to state. Individuals should seek out as much information about the different laws as possible to understand how some of them affect automobile insurance claims. Cheap car insurance along with more expensive car insurance is affected equally, especially with different types of fault.

No Fault Car Insurance States

This type of fault insurance belongs to a select number of states and can have positive and negative effects on insurance claims, depending on how one looks at it. No matter if an individual has cheap car insurance or a higher level type of insurance, claims will ultimately be filed the same way. Essentially, no fault states require that insureds be indemnified for losses by their own insurance company. That means that regardless of fault, the insurance company of the policyholder must reimburse their insured no matter who caused the accident.

As a result of having to pay out to their insured regardless of fault, insurance companies in no fault states take a higher risk with each of their policyholders. Even if the accident was caused by their policyholder, the insurance company must pay both their policyholder and the other driver for injuries and damages rendered. The claims process in these states often take less time to complete than in other states, but the payout is sometimes slow to come because of the higher sums usually involved.

Fault Car Insurance States

For the states that do not have a no fault clause in their car insurance laws, the claims process is much more complex. The burden of proof is on every party involved in an accident. Also, policyholders are not paid out automatically and must go through an inspection of their car; a claims agent must look at both the policyholder’s car and the other drivers’. More paperwork is involved and payouts are still slow to come depending on how easy or difficult it is to discover the person at fault.

If one lives in a no fault state, they are able to get reimbursed by their insurance company regardless of the person at fault. The claims process is quicker but payouts may not come as quickly to those individuals.