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. Florida being a no-fault state for car insurance means all Florida drivers are required to purchase personal injury protection (PIP) insurance to cover their own medical bills after an accident regardless of who was at fault. Additionally, no-fault laws in Florida place limitations on a driver's right to sue after an accident. Drivers in Florida can only sue if the injuries are permanent or the accident resulted in more than $10,000 in damages.

Florida uses a pure comparative negligence system, meaning drivers can collect damages proportionate to their fault in causing the crash. For example, if they're 99% at fault, they can get 1% from the other driver.

Key Things to Know About No-Fault Insurance in Florida

• Faster payouts. Police and your insurance company don't need to fully investigate the accident's cause 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.
• Coverage for medical expenses. Another benefit of having to carry PIP insurance is the knowledge that you're covered no matter who causes an accident. That can make driving in Florida a bit less nerve-wracking.
• Higher premiums. Car insurance in Florida costs $2,313 per year, on average, while the national average cost of car insurance is $1,407 per year. States with no-fault laws typically have higher average car insurance costs due to the required PIP insurance.
• Property damage is not covered. No-fault rules don't apply to property damage. One or more drivers will be at fault after a collision, no matter which state you live in. The police and insurance companies consider Florida law, the circumstances of the collision, and drivers' testimonies before deciding who is at fault.

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

Yes, Michigan is a no-fault state for car insurance. The no-fault system requires Michigan drivers to carry personal injury protection (PIP) insurance to pay for their own medical expenses after an accident, as well as property protection insurance to pay for any damage their cars do to others' property. Drivers in Michigan also have limitations on their right to sue others for their medical expenses after an accident.

In addition to no-fault insurance, drivers in Michigan are required to carry at least $50,000 per person ($100,000 per accident) in bodily injury liability insurance, as well as $10,000 in property damage liability insurance.

Key Things to Know About No-Fault Insurance in Michigan

• Michigan drivers generally need to purchase at least $250,000 in PIP insurance.

• Drivers may opt out of mandatory PIP insurance if the named insured has Medicare Parts A and B and any spouse or relatives that live with them have health insurance or are covered under another auto policy with PIP medical coverage.

• Michigan drivers must carry $1 million in property protection insurance.

• Michigan drivers can only sue for accident-related damages if the incident was in another state or if the driver who caused the collision was not a Michigan resident and their car was not registered in Michigan. Michigan drivers also have the right to sue for damages if the accident was in Michigan and resulted in death, serious injury, or permanent disfigurement.

To protect themselves and their passengers in the event of an accident, Michigan drivers should carefully select their car insurance policies and purchase the proper PIP insurance limits.

To learn more, check out WalletHub's guides to no-fault insurance and the best car insurance in Michigan.

No, California is not a no-fault state for auto insurance. California is an “at-fault” or “tort” state, which means the person who is at fault for a car accident is responsible for paying for other people's injuries and property damage resulting from the accident. Additionally, unlike in no-fault states, drivers in California can file lawsuits to seek compensation for even basic medical expenses after an accident.

In typical no-fault states, drivers are required to carry personal injury protection (PIP) insurance to pay for their own medical expenses after a car accident, regardless of fault. In California, PIP is not required.

Key Things to Know About Insurance in California

• When an accident occurs, the insurance company for each driver who was involved will assign an adjuster to determine who was at fault. To collect payment for their losses, victims must file a claim with the at-fault driver's insurance company.
• Depending on how long fault takes to be determined, drivers can file a claim with their own insurance company if they have coverage applicable to their own expenses, such as collision and comprehensive Their insurer can then recoup the cost from the at-fault driver's insurer if the policyholder is not determined to be at fault.
• California uses a pure comparative negligence system, meaning drivers can collect damages proportionate to their fault in causing the crash. For example, if they're 99% at fault, they can get 1% from the other driver.
• Being an “at-fault” / “tort” state helps keep California's insurance costs relatively low, compared to no-fault states.
• California requires all drivers to carry liability insurance, a type of insurance that pays for others' expenses after you cause an accident, such as damage to others' vehicles and their medical expenses.

In addition to California's minimum coverage requirements, you may want to purchase types of coverage that will pay for your own expenses after an accident. For example, collision and comprehensive insurance will cover damage to your vehicle, regardless of fault.

To learn more, check out WalletHub's guides to no-fault insurance and the cheapest car insurance in California.