What does a ‘no-fault’ insurance policy entail?

A ‘no-fault’ insurance policy is designed to simplify the claims process by allowing individuals involved in an accident to receive compensation for their own losses directly from their insurance provider, regardless of who was at fault for the accident. In this system, each party’s insurance company pays for their respective losses, which encourages quicker resolutions and reduces the need for litigation.

Under these policies, there is a focus on minimizing legal disputes over liability, promoting an environment where individuals can recover damages without having to determine blame. This approach can lead to lower overall insurance costs and streamlined processes for policyholders.

The other options do not accurately reflect the principles of no-fault insurance. Coverage only for the insured party's losses suggests that only one insured person would be compensated, while no-fault allows both parties to receive coverage from their own insurers. The notion that only one party can file a claim contradicts the basic tenet of no-fault policies, which allows both parties to make claims. Lastly, the idea that claims can only be made by legally defined victims doesn't align with the broader intent of ensuring that all affected parties can recover their losses despite fault considerations.