No Fault Insurance Guide

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.
• 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.

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 right 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.

The pros of no-fault insurance are that it ensures quick claim payouts after an accident and reduces the number of lawsuits for minor injuries. The cons of no-fault insurance are that it raises car insurance premiums and makes it difficult for drivers to receive compensation for pain and suffering.  

Pros and Cons of No-Fault Insurance

Pros:

• Quick payouts: Because fault doesn't matter with no-fault insurance, drivers can have their medical claims paid quickly after an accident.
• Fewer lawsuits: No-fault insurance means that insurers don't have to spend as much money on litigation and can pass the savings to customers.
• Broad coverage: No-fault insurance covers a wide range of expenses in addition to medical bills, including child care and household services.

Cons: 

• Higher premiums: No-fault states have higher insurance premiums than tort states because more coverage is required and fraud is more prevalent.
• Limited legal options: Drivers in no-fault states can only sue the at-fault driver if they are seriously injured or incur significant expenses.
• Fewer penalties for at-fault drivers: Negligent drivers face less of an insurance penalty when they injure someone in an accident.
• More traffic deaths: No-fault states have higher traffic fatality than tort states.

When No-Fault Insurance Is a Driver's Choice

In nine of the 12 no-fault states, the no-fault system is mandatory. Three no-fault states – Pennsylvania, Kentucky and New Jersey – allow you to opt out, though. This means that you can be granted the unlimited ability to sue an at-fault driver after an accident, and in Kentucky you can reject personal injury protection altogether. If you live in one of these so-called choice no-fault states, you can weigh the pros and cons of the no-fault system in order decide whether to opt out.

On the other hand, if you live in one of the eight tort states that require PIP or offer it as optional coverage, you can get some benefits of no-fault insurance while still being able to sue the at-fault driver in any circumstance. Additionally, several states either require or offer medical payments insurance, which works similarly to PIP but does not provide as much coverage.

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 own medical claims after an accident regardless of who was at fault.

No-Fault Insurance States

• Florida
• 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.

The three types of no-fault insurance are pure no-fault, choice no-fault, and add-on no-fault. No-fault insurance refers to a legal system that requires drivers to use personal injury protection (PIP) insurance to pay for their medical expenses after any accident and restricts their ability to sue an at-fault driver. The main differences between the three types of no-fault insurance have to do with their exact PIP requirements and lawsuit restrictions.

Types of No-Fault Insurance 

Pure No-Fault

Policyholders are required to have personal injury protection and can only sue the at-fault driver if they are severely injured or incur a significant financial loss. Used in nine states.

Choice No-Fault

Policyholders are required to have PIP but may opt-out of the no-fault system that restricts lawsuits. Used in three states.

Add-on

PIP is either required or optional, and there are no restrictions in place regarding lawsuits. Used in eight states and the District of Columbia.

If you don't live in a state where no-fault insurance is available, you can instead purchase medical payments coverage (MedPay). This type of insurance provides coverage that is similar to PIP, but it is not considered “no-fault” insurance because it is not available in any of the no-fault states.

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

No, no-fault insurance will not pay for your car repairs after an accident. Even in no-fault states, the at-fault driver is responsible for paying for vehicle repairs after an accident, as no-fault rules do not apply to property damage. No-fault states simply require drivers to use their own personal injury protection (PIP) insurance to pay for their medical expenses after a wreck.

As a result, if the other driver is at-fault in an accident that damages your car, requiring repairs, then you need to file a property damage claim through their insurance company. But if you caused the accident, then you need to file a claim with your own collision coverage.

To learn more about coverage in no-fault states, check out WalletHub's no-fault insurance guide. 

The advantages of no-fault insurance are that it allows drivers to have their claims paid quickly after accidents and reduces the prevalence of minor personal injury lawsuits. Without no-fault insurance, drivers might have to wait to be reimbursed for medical bills after an accident when fault isn't immediately clear.

Advantages of No-Fault Insurance

• Drivers can receive a quick payout after an accident.
• Insurers don't have to spend as much money on litigation and can pass the savings to customers.
• No-fault insurance covers a wide range of expenses in addition to medical bills, including child care and household services.

However, there are also some disadvantages to no-fault insurance. Policyholders have a limited ability to sue at-fault drivers, which makes getting compensation more difficult. Additionally, not-at-fault drivers may still see their rates go up after filing a personal injury protection or medical payments claim.

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

Yes, Florida is a no-fault state which means each driver's insurance pays for their own medical bills no matter who causes a collision. Florida drivers are required to purchase personal injury protection (PIP) coverage for that purpose.

Drivers in no-fault states such as Florida can't sue other motorists as easily as drivers in so-called tort states, where fault matters. Specifically, Florida has pure comparative negligence laws. You can collect damages proportionate to your fault. If you're 99% at fault, you can get 1% from the other driver.

Why You Should Care That Florida Is A No-Fault State

• No-fault means faster payouts. Police and your insurance company don't need to investigate the cause of an accident before you can get paid for your medical bills. As a result, your bills get paid more quickly than they would in a tort state, where fault for the accident determines the payout.
• You're covered no matter who causes the accident. This alone can make driving in Florida a bit less nerve-wracking.
• Premiums are higher. States with no-fault insurance struggle with high rates of fraudulent claims, which raise the costs of insurance for everyone.
• No-fault rules don't apply to property damage. One or both drivers will be at fault after a collision, no matter which state you live in. The police and your insurance company consider Florida's laws, the circumstances of the collision, and drivers' testimonies before deciding who is at fault.

Florida limits the timeframe when people can get medical treatment after a crash. The limit (two weeks) is meant to decrease insurance fraud. Unfortunately, fraud is still a huge issue in Florida.

Florida vs. Other No-Fault States

Note: Rates are an approximation based on a Florida driver with minimum coverage and a clean driving record. Actual rates will vary.

No-fault insurance can make the process of recovering from a collision easier for everyone involved, but it's generally more expensive. Buy as much coverage as you can afford to protect yourself in the event of a costly collision.

Yes, Michigan is a no-fault state for car insurance. In the event of an auto accident, a Michigan driver's no-fault personal injury protection (PIP) insurance pays for his or her own medical expenses, lost wages and at-home services like cleaning or laundry. It does not matter who caused the accident, unlike in fault states, where the at-fault driver must pay for the other party's expenses.

Minimum Limits Required By Michigan Insurance Laws

• Bodily injury liability: $50,000 per person / $100,000 per accident
• Property damage liability: $10,000
• Property protection insurance: $1,000,000
• Personal injury protection: $250,000 for most drivers

Michigan No-Fault Restrictions on Car Accident Lawsuits

Each no-fault state has its own rules for when you can sue an at-fault driver after an accident. Currently, Michigan is one of the strictest no-fault states in the country, only allowing you to sue the at-fault driver under very limited circumstances.

When You Can Sue According to Michigan No-Fault Laws

• If the accident is in Michigan and causes death, serious injury, or permanent disfigurement

• If a Michigan driver is involved in an accident in another state

• If a Michigan driver is in an accident within the state involving a non-resident driving a car not registered in Michigan

If the at-fault driver is sued, their liability policy will pay up to its limits. If the court awards more than their limits, they will be personally responsible for paying the amount not covered.

No, California is not a no-fault state for auto insurance. California is one of the 38 states in the country where the person who causes a car accident has to pay for the damage and injuries.

How Car Insurance Works in California

When an accident occurs, the police determine who's at fault. Then, to collect payment for their losses, victims must file a claim with the at-fault driver's insurance company. Liability insurance is the type of insurance that pays victims' claims, and all drivers in California are required to carry it.

Although you're not required to carry any other kind of car insurance in California, you may want to protect yourself in case of an accident, too. For example, if you are at fault in a crash, your car can be covered by collision insurance. Medical payments coverage can pay your medical bills.

What No-Fault State Means for Car Insurance

In a no-fault state, each driver in an accident is responsible for covering their own losses through their insurance company. No one needs to prove who caused the accident to be covered. These states have different types of mandatory insurance, such as personal injury protection, which covers medical bills, costs related to medical care like transportation expenses, and lost wages.

Because of the required personal injury protection, or PIP, drivers in most no-fault states – like Florida, Michigan, New Jersey and New York – pay more for their insurance than California residents. Being a “fault” state helps keep California around the middle of the state rankings for insurance costs.