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What does a no-fault state mean for auto insurance?

Fact-checked with HomeInsurance.com

Article Highlights

In the United States, auto insurance laws are a state-level decision. When it comes to auto accidents, a state can choose to be a choice no-fault state, a tort liability state or a combination. Understanding the differences between these mandates can seem confusing, but we’ve broken down the two main categories, no-fault and tort, to help make it easier. 

When you are moving or getting insurance for the first time, carefully research your state’s fault laws before you make a choice with your auto insurance policy coverage. You may need no-fault auto insurance, and having the right amount of no-fault car insurance could mean the difference between being well-protected or being vulnerable to a lawsuit or costly out-of-pocket expense.

What is a no-fault state? 

What does a no-fault state mean? Drivers have insurance to cover their own injuries and damage rather than insuring to pay out to the other person. An easy way to remember what no-fault means is that regardless of who caused the incident, everyone is required to file a claim with their own insurance. In most no-fault accident states, drivers are required to have personal injury protection coverage as part of their auto insurance policy. 

The rules surrounding auto accident lawsuits in no-fault auto states are strict. These rules are known as threshold conditions and relate to the severity of the injury sustained in the auto accident. 

Alternatively, fault or tort states assign responsibility for the accident. Whoever is at-fault is also responsible for the damages caused by the accident.

No-fault insurance versus at-fault auto insurance

No-fault states require different auto insurance coverage. Here are the primary differences in coverage requirements for no-fault states:

  • No-fault insurance pays for medical bills using personal injury protection (PIP) coverage.
  • Property damages are based on who is responsible in no-fault car accident states.
  • At-fault states have a tort liability system. The insurance company of the driver that causes the accident is responsible for damages.
ProsCons
At-fault car insurance states only require liability insurance.Liability insurance doesn’t protect your car.
No-fault states also require PIP coverage.Insurance in at-fault states is typically more expensive because of the extra coverage.
You don’t have to file a claim with your insurance company in an at-fault insurance state if the accident was caused by someone else, saving you paying a deductible or higher premiums.No-fault insurance premiums and deductibles are your financial responsibility — even when you didn’t cause the accident.
No-fault states limit lawsuits from car accidents.At-fault car insurance states don’t limit lawsuits.

Which states are no-fault states?

In the United States, there are 12 no-fault states, including Florida, Michigan, New Jersey, New York, Pennsylvania, Hawaii, Kentucky, Massachusetts, Minnesota, North Dakota and Utah. Although a US territory, Puerto Rico also has no-fault laws, so we included its requirements below.

States that offer no-fault insuranceMinimum coverage required (bodily injury per person/bodily per accident/property damage)
Florida$10,000/$20,000/$10,000PIP: $10,000
Hawaii$20,000/$40,000/$10,000PIP: $10,000
Kentucky$25,000/$50,000/$10,000PIP: $10,000
Massachusetts$20,000/$40,000/$5,000PIP: $8,000Uninsured/Underinsured motorist: $20,000 per person/$40,000 per accident
Michigan$50,000/$100,000/$10,000PIP: $50,000 – $500,000
Minnesota$30,000/$60,000/$10,000PIP: $40,000
New Jersey$15,000/$30,000/$5,000PIP: $15,000Uninsured/Underinsured motorist: $15,000 per person/$30,000 per accident
New York$25,000/$50,000/$10,000PIP: $50,000
North Dakota$25,000/$50,000/$25,000PIP: $30,000
Pennsylvania$15,000/$30,000/$5,000PIP: $5,000Uninsured/Underinsured motorist: $15,000 per person/$30,000 per accident
Puerto RicoGeneral liability: $3,000PIP: $3,000
Utah$25,000/$65,000/$15,000PIP: $3,000

Besides liability and PIP coverage, some states also require uninsured/underinsured motorist coverage to financially protect drivers from crashes with uninsured parties. The state of Michigan has the highest liability and PIP minimums. Puerto Rico has the lowest requirements.

These states (and US territory) have implemented no-fault auto accident laws, in some variation, to reduce the number of frivolous lawsuits that may occur. Whether through a verbal or monetary threshold to establish the requirements needed to file an auto accident lawsuit, these states require certain standards to be met before approval to file a lawsuit is granted. In three of these states, Kentucky, New Jersey and Pennsylvania, they have what is called “choice no-fault” where motorists have the choice to reject the threshold requirements and file suit. 

How do no-fault-laws affect car insurance coverage?

In no-fault states, and even in some at-fault states, personal injury protection (PIP) coverage is often required. The states determine the minimum PIP coverage levels required for motorists. You may even hear PIP coverage referred to as “no-fault insurance.” This type of coverage pays up to a certain amount on medical bills for you and your passengers in the event of an auto accident.

PIP covers things like health insurance deductibles, lost wages, essential services you are unable to perform due to accident-related injury, funeral expenses and medical expenses exceeding coverage limits. 

The PIP coverage limit required is determined at the state level. As an example, Florida requires residents to carry $10,000 worth of Personal Injury Protection (PIP) and $10,000 of Property Damage Liability (PDL). The PDL does payout for damages if a driver is at fault and causes damage to someone’s vehicle or property. The PIP is the no-fault part where each injured person makes a claim on their own PIP coverage to pay for medical bills.

What should you consider if you live in a no-fault state?

If you live in a no-fault state, know what variation of no-fault your state follows. This is a question you can research online and confirm by asking insurance providers in your state. 

If you live in Kentucky, New Jersey or Pennsylvania, ask about choice no-fault insurance. This applies to states that allow motorists to choose between a no-fault policy or a traditional tort (or at-fault) policy. This selection can be made at the time the motorist gets their insurance policy. If they choose traditional tort, they are opting out of no-fault. 

What is tort and how does it relate to no-fault states?  

Unlike no-fault insurance, tort insurance requires that the law assigns “fault” and the person that is at fault is responsible for all medical bills, pain and suffering and damage. You may have heard this type of insurance referred to as “at-fault”. 

Under this type of plan, auto accident-related lawsuits are not restricted and it does matter who caused the accident. Car insurance coverage will pay up to the limits the insured chooses, but if the limits are exhausted, at-fault drivers are still liable to pay out of pocket. Currently, 38 states (all states that are not no-fault) are tort liability states. 

The takeaway

  • Make sure you know whether you’ll be driving in an at-fault or no-fault car insurance state.
  • You’ll need Personal Injury Protection (PIP) in addition to liability coverage.
  • A no-fault insurance state sees fewer frivolous lawsuits due to the limits imposed on suing someone after a crash.

When shopping for car insurance, there is more to consider than what provider you’ll choose and what your deductible and premium will be. It is also important to understand the auto insurance laws in the state you reside in or any state you intend to move to. 

States that are true no-fault states have different auto accident-related laws than states that are tort liability states. There are also several states who take a hybrid approach by offering choice no-fault. Be prepared to ask your insurance provider these important questions to ensure you have adequate insurance coverage for your state.

Cynthia Paez Bowman

Writer

Cynthia splits her time between Los Angeles, CA and San Sebastian, Spain. She travels to Africa and the Middle East regularly to consult with women’s NGOs about small business development.

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