What is no-fault insurance?

No-fault insurance is a system of car insurance laws that requires drivers to use their own insurance to cover their accident-related medical expenses, regardless of who was at fault for the crash. States that have a no-fault insurance system also limit when someone can sue for further medical-cost compensation.

Key Things to Know About No-Fault Insurance

• Personal injury protection, or PIP, is often referred to as no-fault insurance because PIP is one of the main types of coverage required in almost all of the states that use the no-fault insurance system. PIP covers the policyholder’s medical expenses after an accident, regardless of fault.
• The no-fault insurance system, including PIP, is required in 12 states.
• In states where the no-fault insurance system and PIP are required, PIP is automatically included in any car insurance policy that meets the minimum coverage requirements.
• No-fault insurance can cover peripheral costs related to your injuries, such as childcare, lost wages, home-aid, and funeral expenses.
• No-fault insurance never covers vehicle repairs or property damage. The insurer for the person who caused the accident is responsible for those costs.
• Each state that uses a no-fault insurance system has specific limits for when a person is able to sue for medical-related costs after an accident. For example, in New York, the injured person can sue if they suffer “serious injury,” such as death, dismemberment or significant disfigurement, or if their injuries substantially prevent them from completing their normal daily activities for more than 90 of the 180 days following the accident.

No-Fault vs Choice No-Fault

While 12 states require every driver to have PIP and abide by the laws of the no-fault insurance system, some other states allow drivers to opt out. New Jersey and Pennsylvania, for example, allow drivers to opt-out by choosing an “unlimited right to sue,” and Kentucky drivers can opt out of both the limit on lawsuits and the PIP requirement.

In addition, Delaware and Oregon require drivers to carry PIP coverage, but they don’t use the no-fault system or place limits on after-accident lawsuits.

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