Add-On No-Fault Laws
one of the variations of no-fault laws that allows injured parties involved in an accident to sue in tort but still have the right to receive coverage from auto insurance policies.
Add-on No-Fault Laws Details
Add-on is a type of no-fault rule. It's a jurisdiction law that requires insurance policyholders to seek compensation from their own insurance providers after an accident, regardless of who's at fault. This may entail medical expenses, funeral expenses, income loss, and/or similar expenses. No-fault laws are applicable for damages due to personal injuries. ranging from minor to serious conditions such as permanent loss of a body part, disfigurement, and death. Such laws exist to mitigate the need to involve courts to settle accidental damages, which can often be time-consuming and expensive.
Some states obligate insurers to include one of four variations of no-fault laws (which variation applied depends on the regulation in the given state). The four variations of no-fault laws are as follows:
- Pure no-fault
- Modified no-fault
- Choice no-fault
- Add-on no-fault
Pure no-fault laws require the injured parties to only collect reimbursement from their own insured providers, suing in tort in order to claim damages from the other party is not allowed (except for serious injuries like disability and death). So far, no state in the U.S. enacted pure no-fault.
Modified no-fault laws also prevent the injured to invoke lawsuits but with exceptions. If the damage suffered exceeds certain thresholds, only then the state would allow for suing. Choice no-fault laws let policyholders choose between only no-fault coverage with lower premiums or having the additional right to sue but with pricier premiums. Add-on no-fault is similar to choice no-fault but the only option available is to pay higher premiums in exchange for the right to sue in tort.
Example of Add-on No-Fault Laws
Andy owns an insured car. Unfortunately, he got into a car accident that left him injured. Seeking compensation for his pain and suffering, Andy wishes to claim reimbursement for the damages from his insurance company.
Andy receives the add-on no-fault provision in his insurance policy. As a result, he not only receives insurance coverage but also the right to sue the person he believes is at fault for the accident, regardless of the degree of his injury.
Significance of Add-on No-Fault Laws
Add-on no-fault laws act as an endorsement to insurance policies, also known as personal injury protection coverage (PIP). Add-on no-fault, along with other types of no-fault, are benefits that are typically restricted for the following conditions:
- Medical Expenses: these payments have a maximum limit.
- Funeral Expenses: these also have a payment limit.
- Income Loss: when due to a bodily part or function loss, the amount received is a percentage of the injured parties’ earnings.
- Survivors' Lost Benefits: these are paid to the beneficiaries of the deceased policyholder.
As mentioned before, no-fault laws only cover bodily damage, not property damage. In that case, policyholders may sue in tort for property damages even in a state where there is a pure no-fault rule in place.