What Is No-Fault Insurance & Which States Have It?
You have been injured in an automobile accident, leaving you with medical bills and perhaps other costs such as lost income. Maybe you were at fault in the accident, maybe another driver was. How will you be compensated for these losses?
That depends, in part, on where you live.
Twelve states have “no-fault” car insurance laws, and in these states, benefits for personal injuries are provided to each driver by his or her own insurance company, regardless of fault. The general idea is to make sure everyone has a minimum level of coverage for injuries without the delays and costs associated with determining who caused the accident.
Do You Live in a No-Fault State?
No-fault insurance only matters to you if you live in one of the states highlighted in blue or green on the map below.
These 12 states have instituted no-fault insurance laws to save costs by taking small personal injury claims out of the courts. In no-fault states, drivers get “first-party” coverage for car accident injuries from their own insurer without the need to determine who caused the accident. All car insurance policies in these states must include personal injury protection (PIP) insurance, which provides this basic coverage for minor injuries.
Learn more about personal injury protection insurance.
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.
What Is Choice No-Fault? Three no-fault states, sometimes called “choice no-fault” states, allow consumers to opt out of the no-fault system. These states are highlighted in green in the map above.
- Kentucky: Consumers can reject limitations on their rights 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 that means opting out of the no-fault system.
The remaining 38 states are “tort” states, which have a different system for paying for minor injuries.
Comparing No-Fault And Tort States
The alternative to “no-fault” insurance laws is a “tort” system for paying claims for personal injuries. In these states, the at-fault driver – and that driver’s insurance – are responsible for compensating everyone injured in the accident. In tort states, there are no restrictions on the right to sue after an accident, even if a motorist chooses to purchase PIP insurance.
The table below outlines some of the differences between no-fault and tort insurance.
|No-Fault States||Tort States|
|Who pays medical bills for minor injuries||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.|
|How quickly personal injury claims are paid||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.|
Q&A About No-Fault Insurance
Here are answers to common question about no-fault insurance:
Q: Will no-fault insurance pay for my car repairs?
A: No, There’s no such thing as no-fault insurance for automobile property damage. No matter where you live, the at-fault driver is responsible for paying for car repairs.
Q: What is “opt-in” no-fault insurance?
A: Personal injury protection (PIP) insurance is sometimes called “no-fault insurance,” but it is offered in many tort states that don’t have no-fault laws. In these “opt-in” states, consumers can get PIP coverage for an added level of protection, but they don’t waive any right to sue by purchasing this insurance.
Q: In no-fault states it’s possible to sue if injuries are severe. How severe do the injuries have to be?
A: The rules vary from state to state. The table below summarizes the threshold for filing a lawsuit in the 12 no-fault states.
|State||Threshold for Filing Lawsuit|
|Florida||Loss of important body function, permanent injury, permanent scarring or disfigurement or death.|
|Hawaii||Medical expenses exceeding $5,000; or permanent loss of body function, permanent disfigurement or death.|
|Kansas||Medical expenses exceeding $2,000; or permanent disfigurement, fracture, loss of body part, permanent injury, permanent loss of body function or death.|
|Kentucky||If consumer has not rejected limits on right to sue: Medical expenses exceeding $1,000; or fracture, permanent disfigurement, permanent injury or death.|
|Massachusetts||Medical expenses exceeding $2,000; or loss of body member, permanent disfigurement, loss of sight or hearing, fracture or death.|
|Michigan||Serious injury, permanent disfigurement or death.|
|Minnesota||Medical expenses exceeding $4,000; or permanent disfigurement, permanent injury, disability for 60 days or more or death.|
|New Jersey||Under "limited right to sue" policy: Loss of body part, significant disfigurement or scarring, loss of fetus, permanent injury or death.|
|New York||Medical expenses exceeding $50,000; or dismemberment, significant disfigurement, fracture, loss of fetus, permanent loss or significant limitation of use of body organ; disability for more than 90 days or death.|
|North Dakota||Medical expenses exceeding $2,500; or dismemberment, permanent disfigurement, disability for more than 60 days or death.|
|Pennsylvania||Under "limited tort" policy: Serious impairment of body function, permanent disfigurement or death.|
|Utah||Medical expenses exceeding $3,000; or dismemberment, permanent disability or impairment, permanent disfigurement or death.|
Image: Monkey Business Images/Shutterstock
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