No-fault car insurance can be a confusing topic. A common misconception of no-fault insurance is that you can drive how you wish without fear of taking responsibility for your mistakes. But the term "no fault" has more to do with how insurance claims are handled in your state. In no-fault states, insurance companies recover a policy-holder's financial losses whether he/she is at fault or not. Each state treats the subject of insurance differently. Some states don't offer "no-fault" coverage, but another brand of the same thing, called "tort" coverage.

Although they are similar, there are some variations on how no-fault states deal with insurance issues as opposed to tort states. If you live in a tort state, for example, and are involved in an accident that is not your fault, you have a choice to either let your insurance company fix it, or you can require the other driver's car insurance to handle the details, in effect freeing yourself from the hassle of having to report the accident to your insurance company and paying the deductible. This may be a comforting option, but it also removes you from the equation; if you're dealing with a slow insurance company you'll have a lot of waiting to do.

In addition to the time factor, tort insurance lends itself to the lawsuit as a method to retrieve payment. You would have to sue the driver responsible in order to get bodily injury payment, and suing is no guarantee that you'll ever see compensation. On the other hand, no-fault policies pay immediately (to an extent) and then work with the insurance companies that are involved to ensure that the correct party pays them back. They may also require that before you attempt to sue for damages, you meet with the person who was at fault. Of course, there are disadvantages to the no-fault system, many of them caused by the dishonesty of those who claim more extensive damage than can be proven. In fact, of the 16 or so states that enacted a no-fault policy in the early 1970's, only twelve states remain pure 'no-fault' states: Hawaii, Kansas, Kentucky, Massachusetts, Minnesota, North Dakota, Utah, Florida, Michigan, New Jersey, New York and Pennsylvania. Changes are being made daily to "no-fault" laws. Florida, for example, is repealing their "no-fault" status in 2007, if legislation doesn't change before that time.

No-fault car insurance is being modified in many other states as well, which will introdue more restrictions. Traditionally, no-fault car insurance frowns upon suing for damages, but now it will be even harder for injured motorists to sue for those injuries, including pain and suffering. The conditions that must be met for litigation to be allowed is collectively known as the "threshold." The thresh-hold can be expressed either in verbal terms, or in dollar amounts. By setting this limit, insurance companies are cutting down on the time and expense of un-necessary lawsuits and consumer greed. As thresholds change, so will the process of settling insurance claims. In an ideal world, no-fault car insurance will allow litigation to be a thing of the past.