If you don’t have insurance, anything of value that you own, including your home, savings,  future wages, and other assets, may be taken to pay for those losses. Auto liability insurance can help protect you so that this doesn’t happen. Liability insurance also pays for an attorney to
defend you against any claim or lawsuit that may be payable under the policy.

You can also buy insurance to cover damages to your auto. This optional coverage will help pay for your losses whether or not you were at fault. Insurance is based on the theory that only a small portion of all drivers will be involved in accidents. The premiums paid by all drivers during the year are used to pay for the losses of those drivers who have accidents. When you
buy insurance, you receive financial protection in case you become involved in an accident. You also make sure that a person injured through your fault will recover for losses you cause.

American Auto Insurance

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In fact, according to a study issued by the RAND Corporation, “While no-fault insurance was intended to lower the cost of compensating people involved in automobile accidents by taking most cases out of the court system, it actually increased costs because medical claims rose sharply instead”.

Source: http://www.insurancejournal.com/news/national/2010/03/02/107795.htm

No-fault insurance restricts the right to sue other drivers, receiving payments for pain and suffering or other similar damages that are non-economic and mandates that every driver be insured so that everyone involved in an accident can recover any economic losses directly from their own insurance company.  It was believed that this approach would reduce costs by minimizing litigation.   But because of increased medical costs these types of policies are actually proving to be more expensive. 

There is apparantly a greater tendency to uses specialized medical treatment because they were more likely to be covered and there is also evidence of greater inflation of medical costs in no fault states.  How this information will affect legislation in no-fault insurance states is yet to be seen.

American Auto Insurance

Additional Automotive Resources: Indianapolis Motor Speedway

Technorati Tags: auto insurance, no-fault insurance