No-Fault Insurance

Glossary

No-Fault insurance is a type of renter’s insurance policy that the insurer pays out to the policy owner regardless of who is at fault for the damage or harm. That means if your property was ever damaged, you get to receive the benefits of your renter’s insurance policy, no matter who was responsible. Originating in Canada many years ago, no-fault insurance policies were first adopted in the United States during the 1970’s. Today, this type of renter’s insurance is not typically available through every provider and may be limited to a select number of states.

No Liability Required

The primary reason for employing a no-fault insurance model is to bypass the time and trouble associated with establishing fault or liability. For instance, rather than having to prove that a certain party was responsible for damaging your apartment, no-fault insurance policies simply cover the damage automatically. Without having to cut through all the red tape, insurance companies can provide benefits to the insured much faster. It saves people from having to wait months on end just to receive their insurance benefits. Some even say that no-fault policies allow for lower premiums as well, since settlements can be made without going through a long and difficult legal process. While no-fault renter’s insurance may have some great benefits, it still isn’t the perfect renter’s solution.

Limited Lawsuits

Since no-fault insurance doesn’t require the insurer to establish fault in an accident, it can limit a citizen’s right to sue the person responsible for the damage or bodily harm. In fact, there are several states that have passed strict laws in regards to what a person can sue for if they have no-fault insurance. Basically, the courts have reasoned that since your insurance policy will pay for any damages your property has incurred, there’s no reason for you to sue the other party. That means you’d be unable to sue for general damages, such as pain and suffering. Obviously, this is a major problem to attorneys and many vehemently fight against court rulings restricting the victim’s right to sue. However, in cases where large amounts of damage or serious bodily harm has occurred, some states may still allow the victim to sue.

The Future of No-Fault Insurance

There are some in the renter’s insurance industry that do not believe that no-fault insurance will be around forever. Insurance providers have not been immune to the country’s economic downturn and many are being forced to reexamine the effectiveness of their policies, especially no-fault policies. If they find these types of policies to be less than cost-effective, they could very well be eliminated over the next several years. Since many states don’t even offer no-fault policies, there’s an even stronger chance that no-fault renter’s insurance could be on the way out in the United States.