What are the types of no-fault insurance?

No-fault state means that drivers are responsible for their own medical expenses in the event of an accident regardless of who causes the collision. In most no-fault states, drivers are required to use personal injury protection (PIP) insurance to cover their own medical bills and related expenses.

Additionally, no-fault states restrict your ... read full answerright to sue for damages to only state-specified cases where severe injuries are sustained or expenses surpass a certain threshold.

These rules only apply to bodily injuries, though. Whichever driver is found to be at fault, according to the state’s negligence laws, will still be responsible for the victim’s property damages.

What Key Features of No-Fault States Mean for Drivers

The opposite of a no-fault state is called a tort state. In tort states, drivers are not limited in their ability to sue after an accident, and fault is used to determine responsibility for both bodily injury costs and property damage.

To learn more, check out WalletHub’s guide to no fault insurance.

There are 12 no-fault states for car insurance: Florida, Hawaii, Kansas, Kentucky, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Pennsylvania, and Utah. In these no-fault states, each driver’s car insurance provider pays their medical claims after an accident regardless of who was at fault.

No-Fault Insurance States

• Florida
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• Hawaii
• Kansas
• Kentucky
• Massachusetts
• Michigan
• Minnesota
• New Jersey
• New York
• North Dakota
• Pennsylvania
• Utah

A no-fault insurance system 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.

Special Types of No-Fault States

"Choice" No-Fault States

• Kentucky
• New Jersey
• Pennsylvania

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.

"Add-on" No-Fault States

• Arkansas
• Delaware
• District of Columbia
• Maryland
• Oregon
• South Dakota
• Texas
• Virginia
• Washington

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 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.

No-fault insurance is bad because car insurance premiums are higher in no-fault states, and it is difficult for drivers to sue for damages related to pain and suffering. No-fault insurance also does not penalize negligent drivers as much as so-called tort states.

Why No-Fault Insurance Is Bad:

• Insurance rates are higher in no-fault states than tort states, on average, because more coverage is required.... read full answer
• Your ability to sue an at-fault driver is limited.
• Negligent drivers face less of an insurance penalty when they injure someone in a wreck.
• No-fault states have higher traffic fatality rates than tort states.
• It’s easier to commit insurance fraud in no-fault states.

On the other hand, there are also benefits to no-fault insurance. For example, no-fault insurance pays for medical expenses after all accidents, so it helps drivers immediately get their bills covered without having to wait for fault to be determined.

To learn more, check out WalletHub’s guide to no-fault insurance.