Car insurance rates vary widely by state and within each state due to a wide variety of factors, such as population density, the frequency of theft and vandalism, and local cost of living. One important factor affecting a state's average car insurance rates is whether the state has no-fault insurance laws.

What Is No-Fault Insurance?

Twelve states in the country have no-fault insurance laws, which means that, in an accident between two or more drivers, each driver's insurance pays for their own injuries. The driver who caused the accident doesn't pay for the medical expenses of the other driver or their passengers, as is done in other states, but the at-fault driver's insurance company will still have to pay for both drivers' property damage.

The issue is when an accident victim's own insurance coverage is insufficient to pay for their medical expenses. They might be able to sue the at-fault driver to make up the difference, but their injuries must be very severe to qualify for a lawsuit in a no-fault state. Car accident victims in this situation will want to consult a no-fault insurance attorney about their case because the threshold of "severe" injuries is different in every state.

Why Does This Affect Insurance Rates?

Because insurance companies must pay out compensation for medical expenses regardless of who was at fault, there tends to be more insurance fraud in no-fault states. Car accident victims might exaggerate their injuries to get more in compensation, so auto insurance companies raise their rates to cover this risk. Drivers in no-fault insurance states typically have to pay for personal injury protection, or PIP, which raises their monthly premiums.

Some insurance companies in no-fault states pay not only for medical expenses but also for paychecks lost while recovering from an injury. This benefits accident victims because they're able to receive medical treatment quickly and hopefully avoid financial hardship after a collision. However, it means that insurance companies pass those added costs onto drivers who pay premiums.

No-fault insurance states aim to reduce lawsuits after car accidents by mandating that each driver receive compensation from their own insurance company. If you live in a no-fault state, you likely have higher insurance premiums, but that doesn't guarantee you'll be adequately covered if you are involved in a serious accident. An attorney may help you assess whether you could recover additional compensation from the other driver's insurance company after an accident. Contact a no-fault insurance attorney for more information.