As you can see, under the fault system, the drivers who cause auto accidents are being held fully accountable for their actions, and their insurance companies are the ones that pay for the injuries and damages they do to others.

The main disadvantage with the “fault” system is that it often leads to lengthy and expensive lawsuits as the opponents argue about who was at fault, to what degree, and how much money should be awarded to the innocent individuals. And so the injured parties may have to wait a long time to receive the money needed to pay the medical and other necessary expenses.

On the other hand, under the no-fault system, each individual party recovers the money from their own insurance company regardless of who was at fault. This way, the persons hurt in an auto accident can have the money to pay for the necessary medical care to restore their health back to normal as quickly as possible.

Just as there’s a big disadvantage with the “fault” system, there’s also a big disadvantage with the “no-fault” system.

Because your insurance company is paying you instead of the at-fault driver’s insurance company paying you, your premium may increase because of the claim (which is a request to recover losses covered by an insurance policy). This means that you and the at-fault party are being held equally responsible for the accident. So your car insurance premium may increase.

Also, under the no-fault system, if you’re the innocent party, you can only sue the at-fault person for the amount beyond what your insurance company pays you, and only if you endure a “serious injury” (as defined in the Insurance Law of your state).

Now, this doesn’t seem fair to you, does it?

No, it doesn’t. But if you’re the at-fault driver, it’s a different story, isn’t it?

Anyway, since there are advantages and disadvantages to the fault and no-fault systems, proponents for each one are constantly trying to convince the others that their system is better.

In some states, such as Kentucky, New Jersey, and Pennsylvania, drivers can choose between the fault and no-fault system. Fault drivers maintain full fault rights against all other drivers, and no-fault drivers may seek payments for economic and non-economic losses (such as pain and suffering) from other drivers if the threshold is met.

Comprehensive coverage pays for damage to your vehicle caused by something other than a collision. This includes theft and vandalism, and disasters such as tornado, fire, flood, or wind. If a tree falls on your vehicle, then comprehensive insurance will pay you for the damage.

Because collision and comprehensive coverages usually don’t pay for the total loss, you will have to pay a deductible (an amount you must pay out of your own pocket before your insurance payment kicks in).

For instance, if you have a $250 deductible for collision, then, on a loss of $1,000, you would pay the first $250 and your insurance company would cover the remaining $750. (By the way, you can choose a different deductible for collision and comprehensive.)

If you’re involved in an accident with an uninsured driver, your chance of collecting payment for your damages from him or her is slim to none. So you need to protect yourself and your passengers with uninsured motorist protection, which pays for medical expenses and lost wages, as well as non-economic losses like pain and suffering.

Earlier, you learned that the number of uninsured vehicles on the road could be 20% or more. So your chance of getting involved in a traffic accident with an uninsured driver is very high.

In the same way as uninsured motorist protection, underinsured motorist protection pays for your damages if the other driver doesn’t have enough insurance. Since many drivers are carrying only the minimum amount of insurance that their state requires, you need to protect yourself and your passengers with underinsured motorist protection.

I recommend you buy both uninsured and underinsured motorist protection in the same limits as you purchase the liability coverage on your own vehicle, at least 100/300/50.

You can also get miscellaneous coverages like rental-reimbursement and towing reimbursement. Rental reimbursement pays you $30 to $50 a day while your vehicle is being repaired. If you can afford to rent a car, or if you can borrow or do without one for a few days, then you don’t need to buy rental-reimbursement coverage.

With towing-reimbursement coverage, your insurance company pays $50 to $75 toward towing or roadside assistance expense. Since the amount of payment is so small, you don’t need to buy towing-reimbursement coverage if you can afford to pay it yourself. Or if you belong to an auto club and it’s included with your membership, you certainly don’t need to purchase it.

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