A no-fault accident may or may not affect your future insurance policies. First, we need to define a few terms that may be misunderstood. What’s the difference between no-fault, not-at-fault, and at-fault?
No-Fault versus Not-at-Fault versus At-Fault
Some states have no-fault insurance coverage for personal injuries. It doesn’t typically apply to property damage, such as repairs or downtime. In most of these states with no-fault insurance plans, each person carries personal injury protection (PIP) coverage. With this coverage, you can receive covered medical care up to the limits of coverage under your own policy. PIP often covers lost wages. In most cases, a more severe injury can still be pursued via the court system against the at-fault party.
At-Fault Accidents
At-fault accidents mean you were the cause of the accident. In this type of accident, your own insurance would cover you and the other parties based on your level of coverage. For example, you may have coverage for damage to your vehicle regardless of fault. You may have PIP coverage. Most likely you have liability insurance to cover bodily injury and property damage to third parties involved up to a certain limit.
Not-At-Fault Accidents
If you were not the cause of the accident, it’s a not-at-fault accident. You typically can use your own coverage and/or the at-fault party’s coverage. In a no-fault state, you must use your PIP coverage first for physical injuries according to Vicky Zelen of Zelen Risk Solutions. In other states, you may depend on medical insurance while you wait for the at-fault insurance carrier to take responsibility. Your physical damage insurance may pay for your repairs first. Then, the at-fault insurance would normally pay your insurance company back, and your deductible would be refunded to you.
These not-at-fault accidents allow commercial vehicle owners to pursue lost business income or rental reimbursement from the at-fault party or his insurance company. This is typically called a downtime claim or loss of use claim. If the person who hit you is uninsured, all might not be lost. You may still be able to collect your downtime losses from your own insurance if you buy uninsured motorist coverage for property damage. Zelen stated that some states don’t allow this coverage, so check with your insurance agent.
How do Insurance Companies Treat No-fault Claims?
Insurance companies keep track of all claims. With personal auto insurance, they may even offer accident forgiveness. Some state laws prevent the company from raising your rates after accidents that are not your fault or for filing a no-fault PIP claim. However, multiple PIP claims may be seen as a red flag and affect whether you’re offered a renewal or the rates you’ll be charged. Zelen indicated that there has been a great deal of fraud with PIP claims, so that is why multiple claims of this type are scrutinized.
How do Insurance Companies Treat Commercial Claims?
As stated above, insurance companies keep track of every claim. You rarely see accident forgiveness in commercial policies. It’s important to limit the size of your company’s claims when possible. Anything your insurance pays out on your behalf is on your loss run. However, any money they collect from the at-fault insurance company or person would be subtracted from your claim or shown as money recovered. Many businesses try to limit claims for this reason. Even if you want to change insurance providers, your agent will likely need to obtain the loss runs from your prior insurance carrier to obtain a quote. The claims may have a long-term effect on your insurance premiums. Zelen said, “The effect typically lasts 3-5 years. Furthermore, one bad open claim may affect your ability to find another insurance policy.”
In short, no-fault insurance usually doesn’t have much of an impact on your future personal auto insurance. Many states have laws to protect individual consumers. However, the protection is unlikely to apply to commercial insurance where claims play a huge role.