A majority of the United States require auto insurance, but their practice may differ across the board. A lot of the time, auto insurance covers any damage or medical expenses that a driver owes to another after an accident they caused. This insurance practice goes by a couple of different names -standard, at-fault, or tort. Liability auto insurance is a standard way of insuring drivers and providing payout in the event of an accident. However, this is the case for only 38 states.
The other 12, which we’ll get to in this guide, are known as no-fault states. As opposed to standard or tort states, no-fault states are a car insurance practice in which the drivers cover their own medical expenses after an auto collision regardless of which driver caused it. This is possible through the auto insurance policy known as personal injury protection (PIP). The following is a complete guide to what no-fault insurance is, how it works, and which states utilize it.
What Does No-Fault Insurance Cover?
No-fault insurance, or PIP, provides financial coverage for a variety of personal damages that could result from a car accident. This naturally includes medical expenses but also features coverage for lost wages, child care, household services, survivors’ loss benefits, and funeral costs. That being said, PIP and no-fault insurance don’t provide property damage coverage. The driver at fault will be the one responsible for covering the vehicle damage with their property damage insurance. This is mainly because no-fault insurance doesn’t exist to provide coverage to drivers. Instead, it works to minimize legal consequences by having each party pay their own medical expenses.
How Does No-Fault Insurance Function?
There are different types of no-fault insurance depending on the state, but they are all pretty much practiced the same way. What all 12 no-fault states do have in common is that they all require drivers to carry personal injury protection (PIP) in addition to the usual liability insurance. In the event of an accident, the drivers will file a claim with their own insurance company as opposed to each other’s. At the same time, they aren’t allowed to sue or press charges unless there is a severe injury resulting in disfigurement or death. The drivers are given their insurance payouts in a much faster fashion than liability insurance. Since no-fault insurance doesn’t cover property damage, the driver at fault is still on the line for repair costs as they would be in any other state.
What Are The States Where No-Fault Insurance is Required?
There are 12 states that use no-fault insurance systems, one of which is the unincorporated territory of Puerto Rico.
The states are as listed with their minimum PIP coverage requirements:
- Florida - $10,000 in personal injury protection
- Hawaii - $10,000 in personal injury protection
- Kansas - $4,500 in personal injury protection
- Kentucky - $10,000 in personal injury protection
- Massachusetts - $50,000 in personal injury protection
- Michigan - $50,000 in personal injury protection
- Minnesota - $40,000 in personal injury protection
- New Jersey - $15,000 in personal injury protection
- New York - $50,000 in personal injury protection
- North Dakota - $30,000 in personal injury protection
- Pennsylvania - $5,000 in personal injury protection
- Utah - $3,000 in personal injury protection
What Are The Different Types of No-Fault Insurance?
While all the states mentioned previously employ the practice of no-fault insurance, they may have different types of no-fault coverage. Drivers are also offered a standard basic auto insurance policy with the necessary liability coverage.
The different types of no-fault insurance are:
- Standard/pure - 9 of the 12 states utilize standard no-fault insurance, which requires all their drivers to carry personal injury protection and cover their own injury expenses regardless of who was at fault for the accident.
- Choice - Three states, Kentucky, New Jersey, and Pennsylvania, let their drivers to opt-out of the at-fault insurance. Kentucky allows the rejection of personal injury protection along with the right to sue, New Jersey allows unlimited right to sue insurance, and Pennsylvania offers a full tort policy like any other at-fault state. Unmentioned states which offer choice also applies to are Delaware, Maryland, Texas, Oregon, South Dakota, and Washington.
- Add-on - Eight of the states offer personal injury protection as an option as opposed to mandatory. At the same time, the ability to sue another driver regardless of injury severity isn’t limited. States which offer PIP as an add-on are Arkansas, D.C., Maryland, South Dakota, Texas, Virginia, and Washington.
What Are The Benefits of No-Fault Insurance?
Before diving into what makes no-fault and at-fault different, let’s talk about what makes no-fault insurance so great for its users. There are some things that no-fault can do that at-fault can’t.
Drivers with no-fault insurance will:
- Recieve payout quicker - Medical claims are generally paid out quicker with no-fault insurance since there is no guilty party.
- Spend less money through their insurers - Especially with legal fees, the insurance company’s savings can be passed to the customer.
- Have broad coverage with PIP - Personal injury protection offers coverage beyond medical payments. Lost wages, child care, and other household expenses are covered with such a policy.
Are There Any Problems With No-Fault Insurance?
There are states that were once designated as no-fault territories, like Nevada, Georgia, Connecticut, and Colorado. All these states had operated as no-fault since the 70s, but in the coming decades, they gradually repealed their practice in favor of the tort system. This is because no-fault insurance is not without its faults.
Since there is no guilty party and everyone is expected to cover themselves, this leaves the door open for unstable medical payments. At the same time, it’s an easy target for insurance fraud schemes.
In theory, it should be affordable, but something like providing unlimited medical benefits for those in an auto accident is expensive, and it could lead to severely high rates. This happened in Michigan, and now it’s the state with the most expensive auto insurance. In addition to the higher insurance rates, no-fault states also see a higher traffic fatality rate. Drivers that normally would be at fault are given less of a premium penalty even if they severely injure someone.
How Much Does No-Fault Insurance Cost?
States which mandate or use no-fault insurance report an average cost of $897 per year, assuming the driver has the state’s minimum required insurance. Like any other type of insurance, there are certain factors that determine how much the exact cost will be. This can include your state of residence, the amount of coverage you purchase, your driving record, and your choice of an insurance company. Every insurance provider prices their policies differently, so it helps to shop around and have multiple options. There are states where you can be paying high rates.
What is The Practice in At-Fault/Tort States?
You can call these states whatever you wish -at-fault, tort, or standard; they all mean the same thing. Basic car insurance, or liability coverage, is required in 48 states. In no-fault states, it’s required too. But it’s in tort states where it comes in as a must-have. A driver found to be at fault for an accident is responsible for covering the other party’s property damage and injuries. Their own comes second. Every driver carries a certain amount of coverage for property damage, injury per person, and injury per accident. Each individual state sets the minimum coverage limits everyone should carry. PIP isn’t always required in these states, but it will help with covering injuries and property damage of one’s self if at fault for an accident.
How Are Vehicle Repairs Handled in a No-Fault State?
It may have been mentioned earlier in the post, but if it wasn’t clear or obvious, vehicle damage due to an accident isn’t usually covered by no-fault insurance. Due to this, the practice of insuring these damages is consistent with that of a tort state. Even no-fault states have liability insurance requirements, so a driver who had their car damaged in an accident would file a claim through the at-fault driver’s insurance company. Their property damage auto insurance would cover trips to the repair shop or replacement parts. Meanwhile, each driver uses their own insurance for medical payments, as is the practice of a no-fault state.
What to Consider About No-Fault Insurance
At this point, you’re familiar with the practice, the cost, and the location of no-fault car insurance. All that’s left is the key takeaways and what to really think about if you just moved to a state where a no-fault system is in place. That’s actually the first thing to think about -are you in a no-fault state? The second question to ask would be what is the PIP coverage requirement? From there, it would be time to receive some quotes from local and national insurance providers to see who offers the best rates. If you live in one of the states with high premiums, you’ll want to receive the best deal. Even though your state may be no-fault, you should still drive like every accident would be your fault, as no-fault states tend to see more accidents. It all goes back to the most reliable practice in the auto insurance book -drive safely.
Shopping around is an important part of getting auto insurance. That’s why Insurance Navy lets you compare car insurance quotes online or over the phone. Get a free auto insurance quote with us today. Call us at 888-949-6289, or feel free to stop in at one of our many locations. Quotes are also available online in just minutes. Don’t just settle for any provider when it comes to car insurance.