Updated June 15, 2022
You know the scene after a car accident: everyone has to exchange auto insurance information and decide who’s at fault, right? But if you live in what’s called a no-fault state, things work slightly differently when it’s time to make a claim.
Read this article to learn whether you’re in a no-fault state and, if so, what that means for your auto insurance. And remember, it’s never a bad time to shop around for a new policy with a better premium. Use Insurify for fast and free car insurance quote comparison.
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No-fault states require personal injury protection coverage, which you use in car accidents no matter who is at fault.
No-fault insurance speeds up claims but raises premiums.
No-fault insurance limits your right to sue for damages, but there are exceptions, especially in Kentucky, New Jersey, and Pennsylvania.
No-Fault Insurance States
What does no-failt insurance mean?
No-fault insurance systems are designed to help lower the cost of car insurance. Also known as PIP (personal injury protection) no-fault states help cover the cost of medical expenses after an accident.
First things first. The 12 no-fault states for auto insurance are:
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What is no-fault insurance?
There are two important characteristics of no-fault states:
Drivers are required to purchase personal injury protection as part of their auto insurance policy.
Drivers are restricted in their ability to sue at-fault drivers for medical expenses and other damages after a car accident.
No-fault states are generally the most expensive states for auto insurance in the country because they require you to carry additional coverage. But having this protection for yourself, rather than relying on someone else’s policy, can provide peace of mind and make claims faster and less of a hassle. When you’re recovering from a car accident, this can be very helpful.
Personal Injury Protection (PIP) Insurance
Personal injury protection, or PIP coverage, is the main element of no-fault insurance. This coverage covers your bodily injury claims in an auto accident, no matter who is at fault. The idea is to minimize the number of lawsuits related to medical bills from car accidents since everyone’s responsible for their own bodily injury liability insurance and you can’t sue yourself.
Standard PIP coverage limits are generally pretty low. So depending on your health insurance, you’ll probably want to work with your auto insurance company to raise those limits. If your health insurance deductible is very high, or you don’t have any health insurance, you’ll want high PIP coverage limits in the event of a bad car accident.
No-Fault vs. Tort Insurance
Let’s step back and ask how no-fault auto insurance systems differ from normal insurance coverage (also called “tort insurance”). Liability insurance for property damage and bodily injury is intended to compensate victims of a car accident, and the person who is at fault pays with their liability coverage. This is how at-fault systems, or tort systems, work for car insurance.
In a no-fault system, this is still true for property damage in an auto accident. But when it comes to your personal injury, you’ll rely on your own insurance company and your own policy to pay your medical bills. So if you’re hurt in an auto accident, you won’t have to stress about recouping your medical costs from the at-fault driver’s insurance company.
No-fault systems can make insurance claims faster and less stressful, but they drive up insurance premiums. You’re also limited in your ability to sue for medical expenses and other damages in an at-fault accident (with some exceptions).
States with Optional PIP Coverage
Some state auto insurance laws permit drivers to purchase PIP coverage. They’re listed below. Because these states don’t restrict drivers in their right to sue at-fault drivers for damages, they’re still considered tort states. PIP coverage is an add-on, but these states are not true no-fault states. They are:
“Choice No-Fault” States
In Pennsylvania and New Jersey, you must purchase PIP coverage and maintain bodily injury liability, but you can lower your car insurance rates by choosing between full tort auto insurance and limited tort, which restricts your right to sue for damages.
Kentucky is a no-fault state that allows drivers to opt-out completely from personal injury protection coverage if they want to keep the right to sue the at-fault driver for medical costs in the event of an accident. This effectively converts their no-fault coverage to tort coverage.
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If you’re still a bit unclear on how a no-fault policy works, it might help to think through how the claims process works. Let’s assume that you’re a no-fault policyholder and there’s a car accident where you’re an injured party who needs to make a claim for property damage and medical costs.
Personal Injury Claims
There will always be a driver who’s at fault in a car accident. But no matter who that is, the personal injury protection coverage on your no-fault policy will cover your medical expenses. So even if you’re in an accident with an insured motorist, you’ll be covered. That said, you won’t be able to sue the at-fault driver for additional damages.
Property Damage Claims
Even in a no-fault state, the at-fault driver’s property damage liability coverage pays for damages in a car accident. This isn’t different from normal tort insurance. If you’re in an accident with an uninsured motorist, you’ll need collision coverage or uninsured motorist coverage for your insurance company to cover your costs.
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When You Can Sue with No-Fault Car Insurance
In most no-fault systems, you don’t have the right to sue the at-fault driver for additional compensation for damages and medical expenses. But there are some exceptions, even in no-fault states, if you sustain very serious injuries or opt-out of PIP coverage and choose full or limited tort. Ask your provider about these exceptions, which vary by state.
Shopping for Car Insurance in a No-Fault Insurance State
No-fault insurance keeps you more protected than typical liability insurance, but it’s pricier. An increased cost of insurance demands extra effort to find the cheapest policy you can get. For that, we recommend Insurify, which operates an incredible car insurance comparison site that can deliver you a free list of real quotes, personalized to you.
Frequently Asked Questions
A no-fault insurance system requires drivers to carry personal injury protection (PIP) coverage to pay for their own medical costs in a car accident, no matter who is at fault. Injured parties cannot sue the at-fault driver for damages related to bodily injury. However, property damage claims are settled in a typical way.
There are 12 no-fault states and 9 states with no-fault options, meaning you can buy PIP coverage but anyone can sue for further damages. Pennsylvania and New Jersey provide the choice to their drivers to lower their premiums by choosing limited tort, and Kentucky drivers can choose between no-fault and tort auto insurance coverage. The rest are tort states.
Only Kentucky allows drivers to opt-out of PIP coverage, so if it’s required by your state, you still need it. Health insurance can help with your medical costs, but it generally requires you to use your auto insurance first. And if you have a very high deductible on your health insurance, you can save money making a claim with PIP coverage, which has no deductible.
No-fault policies require you to carry additional liability insurance since you have to be covered for someone else’s property damage and your medical costs in case of an accident. Some states, like Michigan, have high coverage limits for PIP coverage, which raises premiums. In these states, it’s especially important to compare quotes from many insurance companies.
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