No-fault insurance is a system of car insurance laws that requires drivers to use their own coverage to pay for basic medical expenses after a car accident, regardless of fault. The term “no-fault insurance” often refers to personal injury protection (PIP), as well, because PIP is required in 11 no-fault states. This ensures that all drivers are able to get care for their injuries and compensation for the cost without first determining who caused an accident.
What Does No-Fault Insurance Cover?
- Medical expenses
- Funeral expenses
- Lost income
- Child care expenses
- Survivors’ loss
- Household services
How No-Fault Insurance Works
No-fault insurance pays for your medical bills and related expenses if you are injured in a car accident, regardless of who caused the wreck. No-fault states require drivers to carry personal injury protection (PIP) in order to cover their medical expenses. Since all motorists carry mandatory first-party coverage, people hurt in a car accident are not permitted to sue the other driver for compensation unless their injuries are severe or their bills exceed a certain amount.
No-fault insurance offers a faster payout timeline than traditional third-party claims, which occur when you file a claim with the at-fault driver’s insurance company. After a car accident, it can take a long time to make a final determination of who is at fault, especially if it is a larger accident involving multiple vehicles. If you’re filing a third-party claim, then you could be left responsible for your medical expenses while you wait for a settlement check. In contrast, no-fault insurance allows you to be quickly reimbursed without having to wait for fault to be determined.
It’s worth noting that no-fault insurance only applies to medical bills after a car accident, and does not include car repairs. So if your vehicle is damaged in an accident in a no-fault state, the at-fault driver is still responsible for reimbursing you through their property damage liability insurance.
Twelve states have implemented no-fault insurance laws. But even among those states, no-fault insurance doesn’t always work quite the same way.
“Choice” No-Fault Insurance
Three of the 12 no-fault states allow consumers to opt out of the no-fault system: Kentucky, New Jersey and Pennsylvania. They are sometimes referred to as “choice no-fault” states.
- Kentucky: Consumers can reject PIP insurance and limitations on their right to sue by filing a form with the state department of insurance.
- New Jersey: Consumers can choose “unlimited right to sue” insurance and thereby opt out of the no-fault system.
- Pennsylvania: Consumers can choose a “full tort” policy, which means opting out of the no-fault system.
“Add-on” No-Fault Insurance
Eight states and the District of Columbia allow drivers to purchase personal injury protection (PIP) while not limiting their ability to sue an at-fault driver after an accident. Because they don’t limit injury lawsuits, these states technically aren’t considered “no-fault,” though some still require drivers to have PIP.
- Arkansas: PIP is optional, but insurers must offer it
- Delaware: PIP is required ($15,000 per person and $30,000 per accident)
- District of Columbia: PIP is optional
- Maryland: PIP is optional, but insurers must offer it
- Oregon: PIP is required ($15,000 per person)
- South Dakota: PIP is optional
- Texas: PIP is optional, but insurers must offer it
- Virginia: PIP is optional
- Washington: PIP is optional, but insurers must offer it
How Much is No-Fault Insurance?
No-fault insurance costs an average of $897 per year, for state-minimum coverage. The exact cost of no-fault insurance depends on several factors including your state, how much coverage you purchase, your driving history, and your insurance company. Liberty Mutual and Travelers are the cheapest no-fault insurance companies overall.
Cheapest No-Fault Car Insurance Companies
No-Fault Insurance States
No Fault Insurance Requirements by State
|States||PIP Coverage Requirements|
Note: As of February 2021
*Kentucky allows drivers to reject PIP coverage in writing.
The remaining 38 states are “tort” states, which have a different system for paying for minor injuries.
No-Fault States vs. Tort States
The alternative to “no-fault” insurance laws is a “tort” system of insurance for personal injury claims. In “tort” states, the at-fault driver and their insurance company are responsible for compensating individuals that they injure in a car accident. There are also no restrictions on the right to sue after an accident in tort states, even if a motorist chooses to purchase PIP insurance.
Comparing No-Fault and Tort States
|State Type||No-Fault States||Tort States|
|Who pays basic medical bills?||Each driver is paid by his or her own insurer.||At fault driver's insurer pays medical bills.|
|PIP insurance||Replaces compensation that would have been collected from an at-fault driver.||Supplements compensation collected from the at-fault driver.|
|Claim payment time||With no need to establish fault, insurance claims are paid quickly.||Insurance claims may not be paid until after fault is determined, sometimes after a lawsuit.|
|Right to sue||State law limits the rights to sue the at-fault driver unless injuries are severe.||No limits on right to sue at-fault driver based on severity of injuries.|