Car Insurance

What States Have No Fault Auto Insurance

By David Krug David Krug is the CEO & President of Bankovia. He's a lifelong expat who has lived in the Philippines, Mexico, Thailand, and Colombia. When he's not reading about cryptocurrencies, he's researching the latest personal finance software. 7 minute read

As you sit at a stoplight on your way to work, you’re going about your day as usual. Now that the light is green, you quickly speed up and enter the junction.

Bam! Your passenger door gets smashed by a pickup vehicle. Your vehicle is severely damaged, and maybe completely written off, after ending up in a ditch on the side of the road. In spite of the fact that you don’t believe you’ve sustained any serious injuries, you decide to take the ambulance to the hospital anyhow.

Let’s skip ahead a few weeks. You should soon get a sizable reimbursement from your auto insurance, but there’s one small hitch. A visit to the hospital resulted in an astronomical cost that your health insurance provider is only covering partially.

Can you file a lawsuit against the truck driver who caused your accident? If your state follows a “no-fault” policy for vehicle insurance, then probably not.

What Is No-Fault Auto Insurance?

Personal injury protection (PIP) is another name for no-fault car insurance. However, strictly speaking, this is not accurate.

Auto insurance policies in no-fault states are required to include personal injury protection (PIP) coverage. PIP is required by law, and the categories of costs covered by PIP are outlined by the no-fault framework. In addition, drivers’ ability to sue for damages like medical expenses, burial fees, and lost earnings is limited under no-fault rules.

More than a dozen states, called “genuine” no-fault states, require drivers to have no-fault vehicle insurance. If you are a resident of such a state, you are required to purchase PIP and can only sue other drivers under certain circumstances.

Only a handful of jurisdictions allow drivers to forego mandatory PIP coverage, and these are known as “optional” or “add-on” at-fault states. It’s not required, but it’s recommended that you add it to your auto insurance coverage.

How Does No-Fault Auto Insurance Work?

With no-fault insurance, you’ll have to make a claim with your car insurance provider and cross your fingers that they’ll cover your unexpected medical expenses. There is legal redress available only in the event of a catastrophic injury.

Keep in mind that if you are ever in a car accident, there are at least two people involved: you and your insurance company. The first group is you and anyone else riding along in your car. The second party is the insurance company you’re working with.

There are third parties in an accident if additional people, such as drivers or onlookers, are involved. Non-Party Examples Could Include, But Are Not Limited To

  • Drivers of other cars involved in the collision
  • Those occupants of other cars involved in the collision
  • Participating bystanders in the accident

Accident Claims Under No-Fault Statutes

In a real no-fault state, if you have a vehicle accident with a third party and only sustain minor injuries, your insurance company will solely pay for your injuries and not the other party’s. Their personal insurance will pay for any medical bills or lost wages they incur as a result of the accident.

Regardless of who caused the collision, no-fault insurance will cover the damages. For instance, if you and the person in front of you are injured in an accident and the authorities determine that you are 100 percent at fault, your insurance company will only pay for your medical bills. They file a claim with their insurance carrier, and the other driver’s insurance pays for it.

It’s also common for drivers in no-fault jurisdictions to be barred from suing others for damages if they’re at fault in an accident. However, there are criteria that must be met in order to file a lawsuit due to an accident under a no-fault law:

  • Thresholds for Verbal Communication The type of the harm is related to verbal thresholds. Unless an injury results in severe disability, deformity, or death, you cannot generally cross the verbal threshold.
  • Monetary Boundaries Monetary criteria are based on the cost of the injury, such as medical costs, rehabilitation care, and lost wages. Monetary restrictions vary by state, but they must normally be substantial – in the six-figure range.

Some states have monetary minimums while others have verbal ones.

At-Fault Lawsuits for Injuries (Tort Liability States)

However, if you reside in a “tort liability state,” which is another name for a state lacking no-fault legislation, knowing who is at blame in a vehicle accident is absolutely essential.

In the event that you are completely to blame, your insurance policy may be able to pay for everyone’s medical bills. If the other motorist was at fault, both of your claims could be paid by the other driver’s insurance. Instead of PIP, this compensation is paid for through bodily injury coverage (also known as bodily injury liability).

Furthermore, motorists in tort liability jurisdictions have more leeway in filing cases after vehicle accidents. Injured parties have the right to sue the negligent driver, even if the damages are little and the costs of doing so are modest.

Optional No-Fault & Add-On No-Fault States

Some jurisdictions’ vehicle insurance regulations are a hybrid of no-fault and tort liability systems. The laws of these states may be roughly divided in half.

Optional No-Fault Insurance

You can pick between a no-fault coverage and a tort liability policy in a state with optional no-fault. If you sign up for no-fault coverage, you can’t file a personal injury claim with the court after an accident unless your injuries exceed the state’s minimum threshold for either pain and suffering or property damage. If you choose for the more common tort responsibility, you can file a lawsuit against the responsible party regardless of how severe your injuries are or how much they cost you.

No-Fault Add-On

If you live in a state that allows no-fault coverage add-ons, you can include them in your insurance. In the event of an accident, you will be eligible for first-party compensation regardless of who is at fault. However, you can still sue other parties, even for minor injuries, even if you have no-fault coverage. There is no requirement to overcome any monetary or linguistic barriers.

Claims for Property Damage and No-Fault Auto Insurance

Owners of property that you cause damage to in an accident, such as homeowners whose homes you smash into, are also considered third parties.

The owners of damaged property, such as a home, mailbox, or parked automobile, who were not harmed in the accident, are not deemed parties to the no-fault framework under any circumstances. A Personal Injury Protection payment will not be made to them.

The property damage liability coverage of your motor insurance policy may still be able to help them out, though. This protection is mandatory in the majority of states and lessens your financial responsibility for accidents that cause property damage.

What Does No-Fault Automobile Insurance Cover?

If you or a passenger in your automobile are hurt in an accident, your insurance company will pay for your medical bills regardless of who was at blame. If the other motorist and their passengers were injured in the collision, their insurance company would pay for their medical bills.

No matter who was at fault in the collision, you will be covered under this policy. It makes no difference if you are wholly to blame, the other driver is wholly to blame, or both of you are to blame. Each of you may rest assured that your injuries will be covered by your different insurance coverage.

First-party PIP compensation in no-fault states typically goes beyond medical costs. However, the categories of expenditures and the maximum amounts covered for each category vary per no-fault state. True no-fault states often offer at least some protection for:

  • Medical costs, such as hospital and surgery bills
  • Physiotherapy and other recovery-related costs
  • In-home care costs and other costs for services the injured individual is unable to undertake independently
  • Income lost due to an accident or handicap
  • Funeral and cemetery costs

As an important note, a deductible is typically not included in PIP coverage. Assuming your PIP insurance covers your medical expenses, you will likely not have to pay for them out of pocket.

Is No-Fault Insurance Required by Law?

Do you have to carry no-fault insurance? That depends on your location.

No-Fault States

After 2021, the following states mandated no-fault insurance. If you want to know the current requirements in your region regarding vehicle insurance, you should contact your insurance provider or state insurance commissioner.

  • Arkansas
  • Delaware
  • Florida
  • Kansas
  • Kentucky
  • Maryland
  • Massachusetts
  • Michigan
  • Minnesota
  • New Jersey
  • New York
  • North Dakota
  • Oregon
  • Pennsylvania
  • Puerto Rico
  • Texas
  • Utah

Optional No-Fault States

As of late 2021, a number of states offered no-fault insurance as an option. In any of these states, drivers are not required to get PIP coverage for themselves or their passengers.

  • The District of Columbia
  • State of New Hampshire
  • Dakota State
  • Virginia
  • Washington
  • Wisconsin

Bottom Line

It’s important to know the basics of no-fault insurance, even if you don’t currently reside in a no-fault insurance state, because it’s distinct from traditional vehicle insurance in important ways. No-fault insurance rules have been introduced and eliminated in a number of states throughout the years, keeping drivers and auto insurance providers on their toes.

You can bet that the law requires you to have a minimum level of vehicle insurance coverage, regardless of the specific types of coverage that are mandated by your state. Please take the time to read up on the laws that govern your area.

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