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 12 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. The 12 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.
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.
Benefits of No-Fault Insurance
- Drivers can have their medical claims paid quickly after an accident, since fault doesn’t matter.
- Insurers spend less money on litigation and pass the savings to customers.
- The PIP required in no-fault states covers other expenses in addition to medical bills, including child care and household services.
Types of No-Fault Insurance
Of the 12 states with no-fault laws, nine follow the standard model for no-fault insurance, while three make no-fault insurance optional. Additionally, there are eight at-fault states that offer “add-on” no-fault insurance, which gives drivers no-fault coverage without the strict requirements for filing a lawsuit.
“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:
In addition to the 12 no-fault states, eight other states and the District of Columbia require or make personal injury protection (PIP) optional but do not limit their ability to sue an at-fault driver after an accident. Because these states don’t limit injury lawsuits, they 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
The list above is based on data collected in Florida, the largest no-fault state.
No-Fault Insurance States
No-fault insurance only matters to you if you live in one of the states highlighted in blue or green on the map below.
No Fault Insurance Requirements by State
| States | PIP Coverage Requirements |
|---|---|
| Florida | $10,000 |
| Hawaii | $10,000 |
| Kansas | $4,500 |
| Kentucky | $10,000* |
| Massachusetts | $8,000 |
| Michigan | $50,000 |
| Minnesota | $40,000 |
| New Jersey | $15,000 |
| New York | $50,000 |
| North Dakota | $30,000 |
| Pennsylvania | $5,000 |
| Utah | $3,000 |
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. |
Ask The Experts
To gain more insight about no-fault insurance, WalletHub posed the following questions to a panel of experts. Click on the experts below to view their bios and answers.
1. What are the advantages of no-fault insurance laws?
2. What are the disadvantages of no-fault insurance laws?
3. Should drivers get PIP coverage even if it is not required?
Ask the Experts
- Christopher J. Marquette
Ph.D., Grover Hermann Professor of Business, Tabor School of Business, Millikin University
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- Tim Query
Professor, College of Business, New Mexico State University
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- Brenda Wells
CPCU, AAI, CRIS, Robert F. Bird Distinguished Professor of Risk & Insurance, Director, East Carolina University Risk Management program
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