Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insuranc...

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Melanie Musson is the fourth generation in her family to work in the insurance industry. She grew up with insurance talk as part of her everyday conversation and has studied to gain an in-depth knowledge of state-specific insurance laws and dynamics as well as a broad understanding of how insurance fits into every person’s life, from budgets to coverage levels. Through her years working in th...

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Reviewed by Melanie Musson
Published Insurance Expert Melanie Musson

UPDATED: Mar 23, 2022

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What You Should Know

  • You and your passengers’ medical bills will be covered by your own no-fault insurance policy in the event of an accident even if you are not at fault 
  • No-fault car insurance laws are in place in 12 states and Puerto Rico
  • The system aims to replace the need for drivers to sue insurance companies for medical expenses in court 

Drivers who live in no-fault states will make a claim with their own insurance company for medical costs after a car collision. Continue reading for more information on what no-fault insurance covers, where it is required, how to submit a claim, pricing, and what to look for when obtaining no-fault insurance.

What is covered by a no-fault insurance policy?

In a no-fault car insurance policy, or PIP claim, you can normally receive compensation for a wide range of economic or out-of-pocket damages, such as:

  • Medical fees for automobile accident injuries
  • Lost wages, up to a certain amount
  • Cost of replacement services, for tasks you can’t perform because of your injuries
  • Burial/funeral costs 

In the no-fault system, you are not allowed to receive compensation for pain and suffering as part of your case.

Only if your medical expenditures exceed a set amount or your injury is determined to be very serious can you bring a liability claim (or personal injury lawsuit) against the at-fault driver.

There are three different types of insurance policies:

  • No-fault. No-fault insurance systems require drivers to carry PIP insurance and file with their own insurance company for injuries after an accident. In choice no-fault states, drivers can choose between a no-fault or tort liability policy. No-fault in New Jersey and Pennsylvania has a verbal threshold.
  • Tort liability. Traditional tort liability states allow unlimited litigation, and the at-fault driver’s insurance pays for damages and injuries. The other driver and the other driver’s passengers can sue the policyholder for pain and suffering, as well as out-of-pocket expenses like medical bills.
  • Add-on. In add-on states, drivers receive compensation from their own insurance provider, but lawsuits are unrestricted. The term “add-on” refers to the addition of first-party benefits to the standard tort liability structure.

First-party coverage is optional in add-on states, and benefits may be lower than in no-fault states.

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Is no-fault insurance required in some states?

According to the Insurance Information Institute (III), no-fault vehicle insurance legislation exists in 12 states and Puerto Rico. There are two main categories of no-fault insurance regulations in the United States — those governed by verbal thresholds and those with monetary thresholds. 

Verbal thresholds exist in Florida, Michigan, New Jersey, New York, and Pennsylvania. The International Risk Management Institute, Inc., (IRMI) explains that the verbal threshold is a person’s degree of injury that must be satisfied before a lawsuit can be brought against a negligent party in no-fault states. 

Hawaii, Kansas, Kentucky, Massachusetts, Minnesota, North Dakota, and Utah are the other seven states with a monetary barrier, which is the dollar amount of a person’s injury that must be reached before a suit can be brought against a negligent party.  

Three states have enacted choice no-fault legislation. Motorists in New Jersey, Pennsylvania, and Kentucky can choose to reject the lawsuit threshold and sue for any auto-related injury. There are no pure “no-fault” insurance systems in place in the United States. 

How does no-fault insurance work if you need to file a claim?

No-fault states require you to file an auto insurance claim with your own insurance company for any injuries if you’ve been involved in an accident. No-fault insurance reduces the likelihood of an expensive lawsuit for injuries.

No-fault insurance limits your ability to sue another driver in an accident, which helps the courts. This reduces the number of current court cases in the justice system, lowering expenses for everyone involved.

However, no-fault insurance only applies to medical bills. The fault will always be determined in an accident, and either liability or collision coverage will pay for property damage. This means you may still deal with the other person’s insurance company for property damage.

How much does no-fault insurance cost?

The cost of no-fault insurance varies depending on your specific circumstances and where you live. Because each state has its own set of laws, insurance rates will differ depending on where you live.

These are the average insurance costs in these no-fault insurance states for a six-month premium: 

  • Florida — $1,029
  • Michigan — $1,346
  • New Jersey — $836
  • New York — $844
  • Pennsylvania — $695
  • Hawaii — $541
  • Kansas — $738
  • Kentucky — $949
  • Massachusetts — $638
  • Minnesota — $644
  • North Dakota — $622
  • Utah — $604

A driver’s personal characteristics, such as their driving record, age, and car, are reflected in their insurance prices. 

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What to Look for When Getting No-fault Insurance

If you live in a state that has no-fault insurance, you’ll need to know your state’s minimal PIP and liability insurance requirements. Then decide if those minimums are enough. If you need more PIP or liability coverage, you may always get it. Remember that extra coverage means higher rates.

Check to determine whether there’s a cap on medical expenses, if the policy covers lost income, and if it covers extra expenses like in-home care.

Finally, inquire about any discounts you may qualify for like bundling your auto and home insurance. Remember that the more discounts you qualify for, the lower you can reduce your auto insurance rates.