Live in a No-Fault State? Here’s What You Need to Know

What is no-fault car insurance?
You’ve probably heard of no-fault insurance before. Maybe you have even purchased no-fault insurance or heard that your state is a no-fault state. But what exactly does this mean, and how does it affect you as a driver and insurance customer?

Read on to learn more about no-fault insurance, what it means, and how it impacts you:

What is No-Fault Insurance?

No-fault Insurance is required in some states by statute and means that drivers must go back to their own insurance carrier to file a claim following an accident, regardless of fault. No-fault laws were designed to protect consumers by allowing them immediate medical care without waiting for insurance companies to determine fault.

No-fault statutes were intended to curb lawsuits and reduce litigation by restricting injured parties’ right to sue to only the most severe cases. This should, in turn, lower car insurance premiums by removing small claims from courts.

The term is often confusing because it seems like it means you were not at fault for the accident, but it doesn’t mean that – no-fault simply means that you will go back to your own insurance carrier for injury protection without fighting over who is at fault. Liability can be sorted later, but medical treatment is a priority.

How Does No-Fault Insurance Work?

Under no-fault, if you are involved in a car accident, you should file a claim with your own insurance company. The other driver involved in the accident with you should do the same with their carrier.

If you live in a no-fault state, you’ll carry Personal Injury Protection (PIP) on your auto policy. PIP (also commonly called no-fault) is first-party coverage available to people injured in a car accident. Each state determines its minimum policy limits for no-fault, as well as other types of coverage.

For example, in New York State, drivers carry at least $50,000 in PIP coverage. In Michigan, the minimum required amount of PIP coverage is $20,000. Drivers may purchase more coverage if they would like.

No-fault states have a “threshold” for injuries to determine if you can sue an at-fault party. These thresholds can be a monetary amount – the final dollar amount of medical bills you racked up due to the accident – or they can be verbal – a descriptive list of injuries resulting from the accident. If your injuries are severe enough to meet the threshold in your state, you may be able to sue for your pain and suffering.

No-Fault Insurance vs. At-fault Auto Insurance

If your state is not one of the 12 no-fault states, this means it is considered an at-fault insurance state. That means if you are involved in a car accident, the at-fault driver’s coverage will pay your medical bills under its bodily injury liability limits.

There are three types of negligence laws that different states use to determine who is at fault and who can receive a payout under the bodily injury coverage.

  1.     Pure Contributory Negligence – With pure contributory negligence, only an entirely blameless driver is eligible for a payout. This means if you contributed even 1% to the accident, you could not recover. Four states and Washington, D.C. follow pure contributory negligence.
  2.     Pure Comparative Negligence – Under a pure comparative negligence system, your payout is based on your level of fault for the accident. You may be found any percentage, from 1% to 99%, liable for the accident, and the amount your insurance company pays and what the other party’s does would follow this percent breakdown.
  3.     Modified Comparative Negligence – This system allows a percentage of fault to be assigned to each driver, but it sets a threshold above which a driver will not be reimbursed. The threshold is often 50% or 51%, but some states use a slight/gross negligence scale where a driver can only get a payout if they are found to be slightly negligent.

Insurance companies will review all of the evidence from the accident to determine fault, including police reports, witness statements, dashcam footage, scene photos, and other evidence. This can take some time while they sort through and request various pieces of information from you and the other driver or their insurance company.

What is “Choice No-Fault?”

Choice no-fault means that policyholders may choose to have traditional no-fault insurance or pick a traditional liability policy. Under the latter, policyholders can be sued by other drivers or passengers for their medical bills if the policyholder is at fault for the accident.

New Jersey, Kentucky, and Pennsylvania are the three choice no-fault states.

What Does No Fault Car Insurance Cover?

Under no-fault insurance, your insurance company will pay for your medical bills and often lost wages, some essential services, and funeral costs that result from the accident.

Medical expenses can include the ambulance ride from the scene of the accident, the ER visit, imaging studies such as x-rays and MRIs, follow-up physician or therapy visits, and medications and durable medical equipment like a splint or crutches. It may also pay for your mileage or transportation to attend doctor’s appointments related to the accident.

If you have to miss time from work because of the accident, no-fault coverage can pay some of your lost wages, often up to 80% or 85% of your loss. This is limited by your policy limit, as well. Your boss will need to confirm you have missed time, and your doctor will need to verify you were disabled from your job for the time you missed.

Some no-fault states also cover payment for some essential services. Essential services are things that you could do yourself before your accident but need help with after your accident. For example, if you fracture your leg in the accident, you may not be able to shovel snow from your driveway, clean your home, or walk your dog for a time. Essential services coverage may be able to pay someone to do these tasks for you. Coverage is often limited to a daily maximum, usually $20 or $25.

Many no-fault policies also provide some funeral coverage or a minimal death benefit if someone is fatally injured in the accident. Insurance companies may require a copy of the death certificate and funeral expenses to issue the payment.

Some no-fault policies, like those in Michigan, provide some property protection for damages caused by your car to fixed property, like a fence or shed. This coverage can extend to cover damage your car does to properly parked cars, but not to moving vehicles.

Which States are No-Fault Insurance States?

There are 12 states (and Puerto Rico) that are no-fault insurance states:

Four other states had no-fault laws in the past, but have repealed them over time. Those states are Colorado, Connecticut, Georgia, and Nevada. Pennsylvania and Florida’s no-fault laws have previously been repealed and then reinstated.

Is No-Fault Insurance Optional?

If your state is a no-fault state, the coverage is only optional if your state is “choice” no-fault. These states allow you to choose to have no-fault coverage or a traditional liability policy. Otherwise, if you reside in a no-fault state, the coverage is mandatory.

Filing a No-Fault Insurance Claim

To file a no-fault insurance claim, you will need to contact your agent or insurance company directly. Many carriers allow you to file your claim online or through their mobile app instead of calling.

You’ll need to have basic facts of the incident available when you report your claim, including the date and time of the accident, the location of the accident, and the details of your vehicle. You also should provide as much information as you have about the other driver and their car.

Once you file your claim, you’ll be assigned a no-fault adjuster who will work with you to manage your claim. They’ll help you with the paperwork and take your statement. If you have any out-of-pocket expenses, like medical bills or copayments you have paid, you should save them and send copies to your adjuster.

No-Fault Insurance FAQs

What if a Driver in a No-Fault State Doesn’t Have Insurance?

Drivers often enter no-fault states from their home state that may not require no-fault. When someone drives into a no-fault state, their limits are often deemed the same as that state’s minimum for no-fault coverage.

If a driver resides in a no-fault state but does not purchase the required auto insurance in their state, they will face fines, and their license and registration may be revoked. If they’re in an accident, the other driver can still go back to their own carrier for no-fault coverage, so they will be protected even if another driver fails to insure their vehicle properly.

Drivers hurt in an accident that is someone else’s fault may be limited in what they recover if they do not have car insurance when it is required. Michigan goes a step further and forces uninsured drivers to pay for the other person’s damages even if the uninsured driver is not at fault for the accident. These ‘no pay, no play’ laws are intended to discourage uninsured drivers.

Carrying uninsured/underinsured motorist coverage on your policy gives you some additional protection in an accident with an uninsured driver.

Can you sue With No-Fault Insurance?

Yes, under certain circumstances, you can sue for your pain and suffering with no-fault insurance. Your injuries must be severe enough to meet your state’s qualifications for suing, which could mean you sustained certain injuries like a fracture, or that your medical bills exceeded a designated dollar amount. If you meet the requirements or threshold of your state, you could sue the at-fault party.

Additionally, suppose your injuries are severe enough that you exhaust your PIP coverage. In that case, you may be able to sue the at-fault driver to recover out-of-pocket medical expenses you paid after your PIP coverage has exhausted.

How do Insurance Companies Decide who is at Fault?

Insurance companies review many facts to decide who is at fault for an auto accident. They will interview drivers, passengers, and witnesses to the accident and look at the police report. Scene photos and damage photos of all the involved vehicles are examined, and the insurance company tries to determine the order of events to recreate the accident.

Insurance companies may rely on expert opinions and observable metrics like tire marks left from braking or vehicle telematics showing speed. Many vehicles also have dash cameras installed, so insurance companies may request the video from the involved vehicles and surrounding cars which may have witnessed the accident.

Does PIP Cover Your pet?

No, PIP does not extend to pets. You may be able to recover some of your pet’s vet bills if they were injured in a car accident with you if you sue the at-fault party, but these expenses are not covered under your PIP coverage. You may also consider purchasing separate pet insurance that may offer some coverage for this situation.

Does No-Fault Insurance Cover Car Damage?

No, no-fault is designed to cover injury claims and related damages, so medical bills, services, lost wages, and funeral or death benefits. Damages to your car are handled under your property damage coverage, separate from any no-fault insurance on your policy. The exception would be if your car struck a parked vehicle in a state that affords property protection under no-fault, like Michigan. In that case, coverage could extend to the parked car’s damages.

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