If you were in a car accident, no-fault insurance guarantees compensation for any injury sustained up to a certain limit. It does not matter who was at fault under a no-fault auto insurance policy. No-fault insurance is also known as personal injury protection (PIP) insurance. States mandating no-fault insurance are known as no-fault states. As you’ll see later on, there are different variations of no-fault insurance. Moreover, no-fault insurance states will have different policies and options as well. Read on as we look further into what no-fault insurance is and give you a breakdown of no-fault states vs. at-fault states.
What is the no-fault system?
Starting in the 1970s, no-fault legislation began springing up in many states. The idea of a no-fault system is simple in principle. Essentially, instead of tying up the legal system with numerous minor incidents, each driver or passenger within the vehicle will receive compensation from their own private insurance companies, regardless of fault. It’s argued that in this system, society is better off since it avoids the laborious and costly efforts of determining liability for each and every case. Including the no-fault system, there are four categories of different auto insurance systems in the US. Below we’ll examine each four in detail.
No-fault
Pure no-fault car insurance states entail two defining characteristics with regards to insurance coverage:
- Covers you and your passengers for injuries up to a certain limit (i.e. personal injury protection).
- Restrictions to sue the other party.
In other words, if you were involved in an accident with another party, everybody will be compensated by their own insurance company, regardless of fault. Additionally, no one is allowed to sue each other unless injuries were severe in no-fault auto states. No-fault insurance can cover injury-related expenses such as:
- Medical bills
- Lost income
- Health insurance deductible
- Funeral costs
If injuries were severe enough and cross a certain threshold, you may be able to sue the other party. This threshold can be verbal (i.e. death or dismemberment) or monetary (i.e. medical bills). No-fault auto insurance states will each have differing thresholds. No-fault insurance covers only injury-related expenses. Compensation for any property damages to your vehicle must be accessed through your collision coverage. Additionally, no-fault insurance does not cover events like vehicle theft, damage to other people’s property, or medical bills that exceed your coverage limits.
Choice no-fault
In a choice no-fault state, drivers have the option to choose between no-fault insurance or the more traditional tort liability insurance plan. Currently, three states are considered choice no-fault states: Kentucky, New Jersey, and Pennsylvania. If you don’t make a decision, the default plan in Kentucky and New Jersey is no-fault, whereas, for Pennsylvania, the default is the tort liability policy.
Tort liability
Tort liability is the more traditional insurance system with the majority of the states under this category. This type of insurance policy makes no restrictions on the ability to sue the other party. Even if injury damages were as little as $1, you could still proceed to take legal action against the other driver. Traditional tort liability will go through the process of determining fault. The principle behind this system is that the party responsible should pay for their actions, no matter how insignificant the damage. It also gives more incentive for drivers to be more careful when driving.
Add-on
In add-on states, you’ll receive compensation from your own insurance company, just as you would in a no-fault plan. The difference is there is no restriction on lawsuits for add-on policies. This plan is termed ‘add-on’ because the benefit of receiving compensation from your insurance company (i.e., PIP coverage) regardless of fault is ‘added on’ to the traditional tort liability.
Breakdown of no-fault rules by state
Below is a breakdown of which states abide by the four categories mentioned above. No-fault states:
- Florida
- Hawaii
- Kansas
- Massachusetts
- Michigan
- Minnesota
- New York
- North Dakota
- Puerto Rico
- Utah
Choice no-fault states:
- Kentucky
- New Jersey
- Pennsylvania
Tort liability states: All states run under the tort liability system, except for the ones listed above. Technically, add-on states would also be under the tort liability category. Add-on states:
- Arkansas
- Delaware
- Maryland
- New Hampshire
- Oregon
- South Dakota
- Texas
- Virginia
- Washington
- Wisconsin
Note that for add-on states, personal injury protection may be mandatory for some, while others are optional. Even within the four categories, insurance policies and regulations can vary dramatically. States will all have their unique thresholds, minimum/maximum limits, and other policy stipulations.
Valiente Mott
Valiente Mott is a personal injury attorney firm dedicated to helping victims of car accidents. Large corporations and insurance companies tend to manipulate the legal process for their profits, rather than looking out for victims. At Valiente Mott, we work hard to represent our clients so they will receive a just and fair settlement. Contact us today for your free consultation!