How No-Fault Insurance Works & Which States Are No-Fault
No-fault insurance is a type of auto insurance that covers your medical costs in the event of a car accident, regardless of who is at fault.
The theory behind requiring this kind of coverage is to save on expensive litigation costs that can occur when two parties are trying to prove fault in each other. In no-fault states, personal injury protection (PIP) coverage is required and drivers are limited in their right to sue other drivers.
Below, we go in depth about what no-fault insurance covers, where it's required and how much it costs.
How does no-fault insurance work?
No-fault insurance covers your own medical bills if you are injured in an accident, regardless of who is at fault. Your bills are paid by your own insurance company. This differs from other types of auto insurance — such as liability coverage — which only pay out when a party is proven to be at fault in an accident.
A core aspect of no-fault insurance laws is restricting an individual's right to sue or file claims against other drivers for pain and suffering in the event of an accident. However — depending on state car insurance laws — drivers are often allowed to seek compensation for injuries that qualify as serious injuries. This is called a "verbal tort threshold". Injuries that qualify usually include:
- Death
- Disfigurement
- Fractured bones
- Dismemberment
- Loss of a fetus
Some no-fault states allow drivers to sue for economic losses after their medical expenses or lost wages exceed a monetary tort threshold that is set by the individual state. Once this threshold is met, the injured party is allowed to file a suit for economic losses against another driver.
For example, say you live in Utah and get into an accident that causes you to receive $10,000 worth of medical treatment. You can file a claim against the driver that caused the accident because your expenses exceed Utah's $3,000 monetary threshold, even without having used up the mandatory $3,000 of PIP insurance.
The typical form of no-fault coverage is personal injury protection (PIP), which covers medical bills and lost wages for a driver and their passengers. This differs from bodily injury liability coverage, which pays for medical expenses to other drivers if you were proven to have caused the accident.
No-fault insurance claims
A no-fault insurance claim is filed with your own insurer to cover the cost of your medical bills and possible loss of wages due to injury. Filing a no-fault PIP claim can cause your rates to increase, however it depends on your insurer, as well as the state you live in.
If you live in Washington, for example, your car insurance rates cannot go up for an accident that was not your fault. Therefore, filing a PIP insurance claim wouldn't necessarily cause your rates to increase, unless you were proven to be at fault in the accident.
Why require no-fault coverage?
The theory behind mandating no-fault coverage for drivers is that doing so eliminates a great deal of the costs associated with litigation around proving fault following an accident. By reducing the litigation costs to the insurance companies, they can then pass along the savings to drivers in the form of lower insurance premiums. Another benefit of no-fault coverage is that it reduces the amount of time it takes for injured people to receive money for necessary treatments.
No-fault states
There are 12 no-fault states with no-fault auto insurance laws where PIP is required.
State | PIP requirement | Tort threshold |
|---|---|---|
| Florida | $10,000 | Verbal |
| Hawaii | $10,000 | $5,000 |
| Kansas | $9,000 | $2,000 |
| Kentucky | $10,000 | $1,000 |
| Massachusetts | $8,000 | $2,000 |
| Michigan | $250,000 or opt-out | Verbal |
| Minnesota | $40,000 | $4,000 |
| New Jersey | $15,000 | Verbal |
| New York | $50,000 | Verbal |
| North Dakota | $30,000 | $2,500 |
| Pennsylvania | $5,000 | Verbal |
| Utah | $3,000 | $3,000 |
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Choice no-fault states
Kentucky, New Jersey and Pennsylvania are the only no-fault states where drivers have the option of whether they'd like to maintain full tort rights when they buy car insurance. Drivers can opt to retain the right to sue for medical expenses, as well as noneconomic damage. However, the default in these states is a no-fault insurance system.
When you go to buy insurance, you must specify if you want to reject the restriction of your rights or, if you live in Kentucky, submit a form stating that you wish to maintain full tort rights. The trade-off for choosing to maintain full tort rights in a no-fault state is that your car insurance will likely be more expensive.
Kentucky is unique among optional no-fault states. When a driver chooses to reject the no-fault insurance coverage, they are not required to have PIP insurance for themselves. However, they are still required to have guest PIP coverage, which covers passengers and pedestrians in an accident.
Other states that offer personal injury protection
Not all states that offer or require PIP are considered no-fault states. One such example is Oregon, which requires drivers to have $15,000 in PIP coverage, but allows drivers to sue for economic and noneconomic damages without meeting any kind of verbal or monetary threshold.
State | PIP requirement |
|---|---|
| Arkansas | $5,000/person |
| Delaware | $15,000 per person/$30,000 per accident |
| Maryland | $2,500 |
| New Hampshire | Optional |
| Oregon | $15,000 |
| South Dakota | Optional |
| Texas | Optional |
| Virginia | Optional |
| Washington | Optional |
| Wisconsin | Optional |
How much does no-fault coverage cost?
No-fault insurance costs vary based on the insurer, coverage limits and your location. While in theory no-fault insurance is supposed to lower insurance costs, in practice, rates are generally higher in no-fault states compared to at-fault states. Part of the reason is that these states are requiring that drivers purchase more coverage. So, on top of the liability insurance required in all states (with the exception of Florida), no-fault state drivers have the additional cost of PIP.
Before auto insurance reform in July 2020, the most extreme case of this was Michigan, which had the highest average car insurance costs in the country primarily because of its requirement of unlimited PIP coverage for all drivers.
Depending on how much PIP you choose to purchase, it can make up a significant portion of your monthly premium. While the actual prices may vary greatly from state to state, as well as by insurer, to give you a sense of typical PIP costs, we've included several quotes below:
Coverage | Cost of coverage | % of total policy cost |
|---|---|---|
| $50,000 PIP with $200 deductible | $277.60 | 22.85% |
| $50,000 PIP | $285.80 | 23.37% |
| $50,000 PIP with $2,000 monthly work loss | $294.50 | 23.91% |
| $100,000 PIP with $2,000 monthly work loss | $301.60 | 24.34% |
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