What Is Knock-for-Knock Agreement in Car Insurance?

The knock-for-knock agreement was established to reduce the complex processes involving claims from third-party and own damages insurance. In this agreement, drivers agree to pay for their damages without assigning liability.

When you get into an accident, you must establish who is liable before claiming damages. The road to a settlement is often time-consuming and costly and may involve several negotiations between adjusters and lawyers.

The knock-for-knock agreement allows motorists to swiftly resolve any issues from an accident without following complex legal processes. However, this agreement is only applicable when both drivers have comprehensive coverage, and their insurers have a knock-for-knock agreement.

What Is the Knock-for-Knock Agreement?

All vehicles are legally required to have minimum coverage, depending on your state. Theoretically, in an accident, the negligent party is often liable for compensation. However, if the other driver has only third-party coverage, you may only be able to recover some of your damages.

In some cases, if the accident caused extensive damages, you may end up in lengthy litigation processes as you try to recover compensation. This process is complex and often expensive, and most insurance companies would instead not go this route.

The knock-for-knock agreement applies in such cases. In the above scenario, each insurance company pays for damages for their policyholders. While it is not mandated by law as a regulatory requirement, it is established as a general agreement between insurers.

If your insurer has a knock-for-knock agreement with the other driver’s insurance company, you do not have to drag the matter to court or deal with time-consuming negotiations.

A knock-for-knock agreement means no blame is apportioned to one motorist. However, if you prove negligence, you can ask the liable driver to use their coverage for your damages. In this case, you might need to hire a car accident attorney to negotiate on your behalf.

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Benefits of a Knock-for-Knock Agreement

A knock-for-knock agreement limits liability. There is no requirement for one party to pay another for damages as both parties are assumed to have equal liability. However, coverage is limited to the maximum amount specified under your policy.

There are numerous benefits of using a knock-for-knock agreement, including:

  • It saves time, money, and effort in making claims.
  • It protects you from liability for damages caused by another party’s negligence.
  • It protects you from paying more than you are liable for if both parties are at fault.
  • It helps you avoid long and complex litigation processes.
  • It is more convenient compared to other claims processes, for instance, third-party.
  • It can cover medical expenses.

Knock-for-Knock Exclusions

While this type of agreement is convenient, there are specific exclusions. These include:

  • It does not apply to third-party claims.
  • Claims cannot exceed the value specified in the policy.
  • It is restricted to specific geographical areas.
  • Parties must have comprehensive coverage.

knock for knock agreement

Factors to Consider Before Settling for a Knock-for-Knock Agreement

Before settling for a knock-for-knock agreement, several factors must be considered.

In the event of vehicle damage

Any accident or attempt to avoid a collision that damages the vehicle is covered under the knock-for-knock agreement. In this case, each party is liable for their loss and damages. This does not include legal liability.

Claims for medical expenses

In the case of medical expenses covered under worker’s compensation, the knock-for-knock agreement may offer coverage.

More Factors to Consider Under the Knock-for-Knock Agreement

The knock-for-knock agreement helps insurers significantly speed up the claims and settlement process. As a motorist, before settling on this agreement, there are a few factors to consider.

  • As discussed earlier, the maximum compensation you can receive under the knock for knock agreement is the vehicle insured declared value. This offers a significant advantage over third-party insurance, which caps the amount you can claim in vehicular damages.
  • The knock-for-knock agreement may not apply to all cases. This means that even if you and the other party have coverage from insurers who both have the knock-for-knock agreement policy, the case can still proceed to litigation if any of the parties wishes.
  • Under the knock for knock agreement, damages are settled under the own damage clause of your policy.
  • You must check with your insurance company before settling for a knock-for-knock agreement, as not all insurers offer this service.

Knock for Knock Agreement FAQ

Why do insurers offer the knock-for-knock agreement?

The knock-for-knock agreement offers a quick way to settle customers’ claims. Insurers know that litigation and negotiations can be long and expensive processes that take away their profits. They offer this agreement to make it easier for motorists to have damages repaired.

What is the Own Damage in knock-for-knock agreements?

Own Damage refers to the damages the policyholder’s car suffers when hit by another driver.

What if you do not have Own Damage cover?

If your policy does not have Own Damage, a knock-for-knock agreement cannot apply. It only applies to drivers with comprehensive insurance plans that include Own Damage and third-party liability.

Do vehicle owners benefit from knock-for-knock agreements?

In case of a collision with drivers with limited coverage, knock-for-knock agreements cover your vehicle for any extensive damages you may suffer.

You do not have to pay out of pocket for any expensive repairs. Drivers who carry comprehensive insurance often benefit the most from knock-for-knock agreements as compensation is faster and often more inclusive.

The process of filing for third-party claims often involves police reports and sometimes litigation.

A knock-for-knock agreement helps motorists receive compensation for damages much faster. This means that your vehicle will be back on the road sooner, saving you money in alternative transport costs.

What is an example of knock for knock agreement?

Two drivers are involved in a high-impact crash where both vehicles sustained significant damages.

However, both drivers carry comprehensive insurance, and their insurance companies have signed a knock-for-knock agreement.

In this case, both drivers can claim coverage from their insurer under Own Damage. Since both drivers are compensated by their respective insurers, no blame is assigned to any motorists.

Summary

The knock for knock agreement is an efficient settlement process in case of collisions. The agreement is voluntary between insurance companies, so you will need to contact your company beforehand to find out if they offer this service.

As a driver, keeping safe on the roads should always be a priority. However, accidents do happen, and having coverage under agreements such as knock-for-knock can help you get back on your feet much faster.

We recommend that you invest in a comprehensive policy as it offers coverage under the knock-for-knock agreement if your insurer allows it. A comprehensive cover, though more expensive than a third party, offers you peace of mind.

Get in touch with your insurance company to learn how you can benefit from the knock-for-knock agreement. If you have recently been involved in an accident, remember to act fast, as delays will often negatively impact your claim.

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