The no-fault states for car insurance are Florida, Hawaii, Kansas, Kentucky, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Pennsylvania, and Utah. In the 12 no-fault insurance states, each driver’s car insurance provider pays their own medical claims after an accident regardless of who was at fault.
A no-fault insurance system also limits the ability of drivers and passengers to sue for additional compensation. Drivers in no-fault states can sue for injuries only if they are determined to be “severe” – the legal definition of which varies from state to state.
No-fault rules only apply to injuries, however. Property damage claims in no-fault states are still paid by the at-fault driver’s liability insurance.
No-Fault Insurance States
Of the 12 “pure” no-fault states, New Jersey, Pennsylvania and Kentucky are the only ones that give drivers an option to choose between buying a no-fault insurance policy and a traditional auto liability insurance policy.
Besides the 12 no-fault states, some “add-on” states have auto liability insurance laws that are a blend of the no-fault and at-fault insurance systems. These add-on states, such as Virginia and Texas, are not considered to be true no-fault states by the Insurance Information Institute because they do not restrict or place limits on a driver’s right to sue for additional compensation.
Finally, at-fault states follow a tort system, which assigns responsibility for an accident to a driver or drivers. At-fault states also allow injured parties to sue negligent drivers for injuries, as well as pain and suffering, without restrictions. Most U.S. states are at-fault states.
Insurance Rates in No-Fault States
Drivers who live in one of the 12 no-fault insurance states can expect to pay more for auto insurance than those in at-fault states. Insurance fraud is more common in no-fault states, given that claims are paid regardless of who was at fault, providing an incentive for some individuals to exaggerate the extent of their injuries. Those heightened rates of fraud, combined with mandatory PIP insurance, raise costs for auto insurers, which are passed on to consumers.
It should be no surprise that the three most expensive states in WalletHub’s Cheap Car Insurance Study – Michigan, New York, and New Jersey – are all no-fault states. So if you live in a no-fault state or will be moving to one, be sure to compare quotes so that you can get an auto insurance policy that fits your needs and your budget.
WalletHub Answers is a free service that helps consumers access financial information. Information on WalletHub Answers is provided “as is” and should not be considered financial, legal or investment advice. WalletHub is not a financial advisor, law firm, “lawyer referral service,” or a substitute for a financial advisor, attorney, or law firm. You may want to hire a professional before making any decision. WalletHub does not endorse any particular contributors and cannot guarantee the quality or reliability of any information posted. The helpfulness of a financial advisor's answer is not indicative of future advisor performance.