What Is No-Fault Insurance and What Does it Cover?
Updated: December 2016
Beginning in the 1970s, many U.S. states passed legislation to introduce “no-fault” auto insurance. According to the Insurance Information Institute (III), the goal was to simplify the process of determining which driver is responsible for an accident.
As of 2014, 12 states have some type of no-fault car insurance law, according to the III.
- No-fault insurance required. This type of coverage is mandatory in Florida, Hawaii, Kansas, Massachusetts, Michigan, Minnesota, New York, North Dakota and Utah.
- No-fault insurance optional. Kentucky, New Jersey and Pennsylvania allow drivers to choose to buy either no-fault or traditional auto insurance.
How Does No-Fault Coverage Work?
In states without no-fault coverage, typical insurance claims may be paid out as follows:
- If you’re injured in an accident caused by another driver: The at-fault driver’s bodily injury liability coverage may help reimburse your medical expenses, up to the the policy limits.
- If you’re injured in an accident you cause:Your medical payments coverage (if you’ve opted for it) may help reimburse your medical expenses, up to the limits you selected.
In states with no-fault coverage, if you’re injured in an accident, your personal injury protection (PIP) may help pay for associated costs:
- Regardless of who’s at fault
- Up to a certain threshold set by your state’s laws
What Does No-Fault Insurance Cover?
According to the III, personal injury protection (PIP) may help cover:
- Your and your passengers’ medical bills related to a car accident
- Expenses such as lost income, childcare and household services if your injuries prevent you from returning to work or doing necessary tasks for a period of time
Lost-wage benefits vary by state, however, and aren’t necessarily guaranteed, so it’s a good idea to read your policy or ask your agent to make sure you know what coverages your policy provides.
What’s Not Covered by No-Fault Insurance?
- Damage to your vehicle. Collision coverage (if you’ve opted for it) may help pay to repair your car if it’s damaged in a crash with another vehicle.
- Damage to other people’s property. If you’re responsible for a car accident that damages someone else’s car or property (such as a fence or building), your property damage liability coverage may help pay for the damages, according to the III.
- Excess medical expenses. No-fault PIP coverage typically has limits. Medical bills or lost wages that exceed those limits won’t be reimbursed. However, Nolo.com says some no-fault insurance states offer an exception. You may be able to file personal-injury lawsuits against other drivers if they’re responsible for seriously hurting you or someone else in your car, or if your medical bills exceed a certain dollar limit.