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Car insurance is a complicated subject at the best of times, and trying to figure out whether you need to buy no-fault insurance doesn’t make it any easier. How does no-fault insurance work, exactly, and what makes it different from other auto insurance? How do you know which kind of insurance is right for you?
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When it comes to no-fault vs. fault insurance, the type of insurance you need comes down to the rules in your state. Whether you are working with an insurance agent or buying directly from the company, the insurance experts you are working with will help make sure you have the right type of coverage based on your state laws.
No-fault insurance laws are designed to limit how and when you are allowed to sue someone because of a car accident
No-fault insurance only covers medical issues and the expenses associated with those medical issues, not property damage
No-fault insurance is another name for personal injury protection coverage, also known as PIP
Each state has different requirements when it comes to coverage limits, and not every state that offers PIP insurance has a coverage limit or monetary threshold to meet before you can take another driver to court
No-fault insurance is a type of auto insurance that can help cover medical expenses and other costs for yourself and your passengers in the event of a covered accident, no matter who is found at fault. In the event of an accident with a no-fault policy, drivers file a claim with their own insurance company rather than trying to assign fault.
No-fault insurance can be talked about in two different ways:
State regulations - States can be divided into no-fault states and fault states based on their auto insurance requirements
Additional insurance coverage - No-fault insurance is another name for personal injury protection (PIP) coverage, which is the portion of your policy that pays for your medical expenses in a covered accident
Don’t let the two definitions confuse you—no-fault states are just the places where you are required to have no-fault insurance, otherwise known as PIP coverage.
No-fault insurance states are different from fault insurance because you file bodily injury claims through your own insurance no matter who is at fault in an accident. In states with fault insurance, each insurance company pays for damage based on the degree of fault held by each driver.
For example, if a driver runs a red light and hits someone going through an intersection, in a fault state that driver is likely to be 100% at fault for the accident and their auto insurance will pay the other driver’s bodily injury and property damage liability expenses.
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No-fault insurance was designed to reduce stress on the court system by preventing people from suing another driver to have their medical bills covered in a car accident. It is also designed to help reduce the cost of car insurance by reducing litigation expenses for insurance companies.
Despite the goal of reducing expenses, many no-fault states have the most expensive insurance in the nation. For example, Michigan is a no-fault state and consistently ranks as having some of the highest insurance rates in the country.
PIP insurance provides coverage for injuries and related expenses, including:
Medical expenses resulting from the accident
Lost income when you can’t return to work after an accident
Child care expenses due to the accident
One of the biggest parts of no-fault insurance is that it limits your right to sue another driver for damages in an accident. But because the laws regarding no-fault insurance vary from state-to-state, there are many things that may be covered in one place but not another, or may be covered very differently.
For example, some no-fault auto insurance states allow drivers to sue for damages after their expenses go beyond a certain amount as determined by the state, referred to as a monetary tort threshold. Other states use a verbal tort threshold, which means drivers are allowed to sue for injuries if they are considered “serious injuries” whether or not they meet a specific monetary limit.
For your average driver in a no-fault state, all this means is that there are rules and regulations regarding how and when you are allowed to sue someone because of a car accident. It is important to review your state’s laws regarding no-fault insurance so you understand exactly what you can and cannot do if you are involved in a car accident.
No, because no-fault insurance only covers medical issues and expenses associated with those medical issues, theft is not covered under PIP. Drivers concerned about car theft should purchase comprehensive insurance, which covers theft, fire, hail, water damage, vandalism, etc.
No-fault coverage only provides coverage for bodily injuries, not damage to your property. While Michigan does require you to purchase property protection insurance (PPI) as part of their no-fault insurance laws, it only covers damage you may cause to buildings, standing structures, and properly parked cars.
It doesn’t cover any damage to your own vehicle, which means drivers in any state who are concerned about paying for those damages will need to purchase collision insurance. Collision insurance covers damage to your vehicle in a collision with another car or stationary object.
Each state has different requirements when it comes to coverage limits, and not every state that offers PIP insurance has a coverage limit or monetary threshold to meet before you can take another driver to court.
For example, Oregon is a tort state, not a no-fault state, which means they require you to carry PIP insurance but it doesn’t impact your ability to sue another driver for compensation in an accident.
Depending on your state, required coverage limits can range anywhere from $3,000 to $250,000. You can check with your insurance representative to make sure you are carrying the correct amount of PIP insurance.
There are 16 states and territories that require drivers to carry PIP insurance, including:
There are six additional states that offer PIP coverage but do not require drivers to carry it, including:
District of Columbia
Sometimes your rates will go up after a no-fault accident and sometimes they won’t, depending on how the insurance company views the situation. Just because no-fault insurance stops you from taking another driver or insurance company to court over an accident doesn’t mean the insurance company isn’t reviewing things. If they find you were the one who caused the accident or the claim was for a sizable amount of money, you could very well see an increase in your premiums.
This all depends on the laws in your state and the specifics of your policy. For example, some insurance policies offer accident forgiveness, so you may be able to avoid a rate increase if this benefit is included in your policy.
There are 27 states that do not require no-fault insurance coverage and 17 states that do require drivers to carry PIP coverage. There are six states where no-fault insurance is optional: District of Columbia, New Hampshire, South Dakota, Texas, Virginia, and Washington.
Yes, Florida is a no-fault auto insurance state. All drivers in the state are required to carry a minimum of $10,000 in PIP coverage.
No, South Carolina uses a fault insurance system, requiring drivers to carry minimum liability levels of 25/50/25 and matching levels of uninsured motorist coverage.
Yes, Maryland requires drivers to carry PIP coverage in addition to minimum liability levels of 30/60/15.