Glossary of No
Fault Automobile Insurance Terms
No Fault Auto Insurance. There are different
versions of no fault auto insurance laws in 12 states and Puerto
Rico. The idea is to discourage lawsuits by allowing policyholders
to recover financial losses from their own insurance company without
having to prove that anyone is at fault in an accident. Motorists
may only sue for severe injuries and for pain and suffering if
their case meets certain conditions. Eight states, including Florida
and Utah, require that you meet a minimum dollar threshold to
be able to bring a lawsuit over damages over and above your economic
losses. Florida, Michigan, New Jersey, New York and Pennsylvania
use a verbal description as a threshold (i.e. severe disfigurement,
disability or death). In New Jersey, Pennsylvania and Kentucky,
when they buy insurance, motorists may choose to reject the lawsuit
threshold and keep their right to sue for any auto-related injuries.
Personal Injury Protection (PIP). This is a
package of first party coverages required under the no fault system.
It provides broad protection for medical costs, rehabilitation
costs, lost wages, loss of essential services normally provided
by the injured person (i.e. a babysitter, housekeeper), and funeral
costs. This coverage is mandatory in Florida.
- A minimum coverage amount of $10,000 per person;
- Coverage of 80% of medical expenses;
- Coverage of 60% of lost income;
- Coverage for replacement services; and
- Up to $5,000 in death benefits.
The Florida law effectively provides a coinsurance requirement
for its PIP claimants such that the claimant is responsible for
20% of medical expense and 40% of lost income that is not covered
by the basic PIP coverage for the first $10,000 of loss per person.
Claimants may sue for recovery of uncovered economic damages within
the first $10,000 and for loss amounts greater than $10,000 that
are not subject to the coinsurance requirements.
Bodily Injury Liability Coverage (BI). Bodily
Injury Liability coverage pays for injuries to other people when
the insured vehicle’s driver is legally at-fault. This coverage
is required in Florida. The mandatory minimum limit is $30,000
per person.
Uninsured/Underinsured Motorist Coverage (UM).
This coverage pays (up to the coverage limit) the insured person
and other passengers in the vehicle when they’re injured
as the result of an accident where the at-fault driver is uninsured,
underinsured or was a hit-and-run. In Florida, for example, medical
costs are picked up by your own no fault medical coverage (PIP),
but if you have severe injuries that require long term additional
care for pain and suffering, it is unlikely that even if you take
them to court that the uninsured driver who caused the accident
will have any money to collect.
Medical Payments Coverage (MP or Med Pay). This
coverage pays the doctor, hospital bills, and funeral expenses
for injuries to you and to members of your family who live with
you, regardless of who caused the accident. Med Pay is the principal
auto coverage for injuries to you and your family sold in states
with traditional tort laws.
Threshold. This is a cutoff point, which, if
met, allows the injured person to file a lawsuit to attempt to
be paid for damages for bodily injury, such as “pain and
suffering,” from the driver who caused the accident (or
usually his or her insurance company).
- Monetary Threshold. In some no fault states,
a dollar amount for medical and rehabilitation expenses must
be reached in order to file a lawsuit for damages for non-economic
damages (i.e. pain and suffering) against the driver who caused
the accident.
- Verbal (or descriptive) threshold. A description
of the type of serious injury a person must sustain before being
able to file a lawsuit for damages for bodily injury against
the driver who caused the accident (e.g. severe disfigurement,
disability or death). This type of threshold is applicable in
Florida.
Tort. A wrongful act resulting in damage or
injury, on which a civil action can be based. This doesn’t
include breach of contract.
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