What is meant by "no-fault" insurance?

"No-fault" insurance refers to a system designed to simplify the claims process by ensuring that each party involved in an accident can receive compensation for their own damages directly from their own insurance, regardless of who was responsible for the accident. This approach aims to reduce the need for litigation and lengthy negotiations over fault determination, allowing for quicker access to benefits for those affected by an accident.

Under a no-fault system, individuals do not have to prove that the other party was at fault to receive compensation for their expenses, such as medical bills and lost wages. This is particularly beneficial in minor accidents where determining fault can be contentious and time-consuming.

The other options describe different or unrelated insurance concepts. One suggests a narrow coverage that only applies to the party found at fault, while another implies that negligent accidents are excluded from coverage, which is contrary to the no-fault principle. The last option describes a scenario where legal action is necessary, conflicting with the no-fault premise of streamlined and self-contained claims handling. Therefore, the correct understanding of no-fault insurance hinges on the ability for each party's insurance to cover their damages without needing to establish fault first.