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What is No Fault Insurance and Which States Are No-Fault?

What is No Fault Insurance and Which States Are No-Fault

A majority of the United States require auto insurance, but their automobile insurance policy 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 a car accident they caused. This car 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 a car 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 auto insurance laws states. As opposed to standard or tort states, no-fault laws states are a car insurance practice in which the drivers cover their own medical expenses after an auto collision regardless of which driver caused the car accident.

This is possible through the auto insurance policy known as personal injury protection or PIP.

The following is a complete guide to what no-fault coverage insurance is, how no-fault auto insurance works, and which states utilize the no-fault laws system.

What is No Fault Insurance and What is No-fault Insurance Coverage?

No-fault insurance and Personal Injury Protection or PIP provide financial coverage for a variety of personal damages or personal injuries that could result from a car accident, all terms not covered by common liability insurance.

A no-fault auto insurance policy naturally includes medical expenses but also features additional coverage for lost wages, child care, household services, survivors’ loss benefits, cost of replacement services, and funeral expenses and costs after an auto accident.

That being said, Personal Injury Protection insurance, or PIP, and no-fault insurance don’t provide property damage coverage or coverage for economic losses. The driver at fault will be the one responsible for covering the vehicle damage with their property damage insurance, collision insurance, or comprehensive coverage.

This is mainly because no-fault insurance doesn’t exist to provide coverage for damage to property to drivers after an automobile accident. 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 or PIP in addition to the usual liability insurance. In the event of an accident, the drivers will file an auto insurance no-fault claim with their own car insurance company as opposed to each other and receive first-party benefits.

If the value of your noneconomic damage exceeds a predetermined tort threshold, you might be able to file a lawsuit. In states with a verbal threshold, only “severe” injuries or fatalities are eligible for legal action for non-economic damages against the negligent driver. Unless a certain dollar amount in medical costs is reached, lawsuits for non-economic damage are barred in a no-fault car insurance state with monetary thresholds.

The drivers are given their auto 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 Personal Injury Protection or PIP coverage requirements:

  • Florida - $10,000 in personal bodily injuries protection
  • Hawaii - $10,000 in personal injury protection
  • Kansas - $4,500 in personal injury protection
  • Kentucky - $10,000 in personal bodily injuries 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 bodily injuries 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 auto insurance 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 car 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 auto insurance companies, 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 Personal Injury Protection or PIP as an add-on are Arkansas, D.C., Maryland, South Dakota, Texas, Virginia, and Washington. First-party coverage may not be required in add-on states, and the benefits might be less generous than in actual no-fault jurisdictions.

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 auto insurance can do that at-fault car insurance can’t.

Drivers with no-fault insurance will:

  • Receive payout quicker - Medical claims are generally paid out quicker to drivers with no-fault insurance since there is no guilty party.
  • Spend less money through their automobile insurers - Especially with legal fees, the car insurance company’s savings can be passed to the customer.
  • Have broad coverage with personal injury protection or PIP - Personal injury protection offers coverage beyond medical payments. Lost wages, also referred to as loss of income, child care, and other household expenses are covered with a no fault insurance 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 no-fault insurance practice in favor of the tort car insurance system. This is because no-fault insurance is not without its faults.

Since there is no guilty party and every driver is expected to cover medical costs themselves, this leaves the door open for unstable medical payments. At the same time, it’s an easy target for car insurance and medical treatment fraud schemes.

In theory, no fault insurance 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 no-fault auto insurance rates. This happened in Michigan, and now it’s the state with the most expensive auto insurance.

In addition to the higher car insurance rates, no-fault states also see a higher traffic fatality rate. Drivers that normally would be at fault are given less of a car insurance premium penalty even if they severely injure another driver or their passengers.

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 car insurance.

Like any other type of car insurance, there are certain factors that determine how much the exact cost will be. This can include your state of residence, the amount of car insurance coverage you purchase, your driving record, and your choice of an auto insurance company.

Every car insurance provider prices their no fault insurance policies differently, so it helps to shop around for no-fault auto insurance and have multiple options to choose from. There are states where you can be paying high no fault insurance 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 a car accident is responsible for covering the other party’s property damage and personal car accident injuries. Their own property damage and personal injuries come 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. Personal Injury Protection or PIP coverage levels aren’t always required in these states, but it will help with covering personal car accident injuries and property damage of one’s self if at fault for a car 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 a car accident isn’t usually covered by no-fault insurance. Due to this, the practice of insuring these car accident 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 a car accident would file a car insurance claim through the at-fault driver’s insurance company.

The property damage auto insurance of the at-fault driver would cover trips to the repair shop or replacement parts. Meanwhile, each driver uses their own auto 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 no-fault system, the no fault insurance 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 Personal Injury Protection or PIP coverage requirement?

From there, it would be time to receive some no-fault auto insurance quotes from local and national car insurers to see who offers the best rates for your no-fault insurance. It’s important to not keep your car uninsured or underinsured.

If you live in one of the no-fault system states with high no-fault auto insurance premiums, you’ll want to receive the best deal for your no-fault insurance and save some money.

Even though your state may be no-fault, you should still drive like every car accident would be your fault, as no-fault states tend to see more car accidents. It all goes back to the most reliable practice in the auto insurance book -drive safely.

Shopping for no-fault auto insurance? Insurance Navy can give you a hand!

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.

Updated: December 2023

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