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A Beginner's Guide to No-Fault Insurance

Most states use a fault system to determine who pays for medical bills after an accident. If you get into an accident, the police arrive on the scene and draw up a report determining who’s at fault for causing the accident. If you’re found to be at fault for an accident, you may need to cover the other party’s medical bills through your insurance. Your insurance rates will almost always increase after you’re found to be at fault. This is where no-fault insurance comes in.

About 12 states have gotten rid of the at-fault system and instituted no-fault laws. In a no-fault state, you must make a claim for your own medical bills through your auto insurance provider, regardless of who caused the accident.

Read on to learn everything you need to know about no-fault insurance, how it’s different than normal car insurance and where you should start shopping for a policy.

Find No-fault Insurance Companies
Tip: Try 2-3 companies to find the best rate

Quicklook: No-Fault Insurance Companies

What’s No-Fault Insurance?

Sometimes called personal injury protection (PIP), no-fault insurance helps you pay for medical bills that aren’t covered by your health insurance after an accident.

A no-fault insurance claim may also help you cover lost wages depending on the policy and how extensive your injuries are. A key feature of no-fault insurance is that your insurance provider cannot deny you compensation if you caused the accident.

No-fault insurance is used in the following states and territories: District of Columbia, Florida, Hawaii, Kansas, Kentucky, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Pennsylvania and Utah. No-fault insurance is required in some states and optional in others. In three states (Pennsylvania, Kentucky and New Jersey) you may choose to opt out of the no-fault system in exchange for a lower premium.

No-fault insurance may pay for:

  • Your health insurance deductible
  • Expenses that are over what your health insurance will cover
  • In some states, lost wages if you aren’t able to work after an accident
  • Essential services (like cleaning or childcare) that you can’t cover because you’re recovering from the accident
  • Funeral services

No-fault insurance won’t cover:

  • Damage to your vehicle. Collision coverage can help you repair your vehicle after an accident.
  • Damage to the other driver’s vehicle. Liability coverage is required in most states and covers the cost of repairing the other driver’s vehicle after an accident. In states where no-fault insurance is required, personal liability protection and personal injury protection are often bundled together.
  • Theft, vandalism or non-accident related damages. These types of damage are usually only covered under comprehensive policies.

Difference Between No-Fault and Regular Car Insurance

There is one key difference between no-fault car insurance and regular car insurance: Your ability to sue another driver in a no-fault state is severely limited.

No-fault insurance laws were put into place in an attempt to stop excessive legal bills and lawsuits over medical bills following an accident. In some states, you may sue another driver even under a no-fault statute, but only if your medical expenses are exceptionally high. You cannot sue for pain and suffering in a no-fault state.

Let’s look at an example between a no-fault state and a state with standard car insurance policies (sometimes called “tort liability states”).

If another driver runs a red light and hits your vehicle, you’re injured and taken to the hospital where you incur $5,000 worth of medical bills. In a no-fault state, you would submit a claim to your own insurance provider for the cost of your medical bills, despite the fact that the other driver caused the accident.

In a tort liability state, you or your insurance company would submit a claim to the other driver’s insurance company. If the other driver was found to be 100% at fault for the accident, all of your medical bills would be paid up to the other driver’s policy limits.

However, if you’re found to be at least partially at fault for the accident, your payout is reduced. For example, if phone records show that you were talking on your cell phone during the crash, you might be found to be 30% at fault for the accident.

This would reduce your payout by 30%. If the other driver was uninsured or you aren’t happy with the outcome, you can sue the other driver. In a no-fault state, your ability to sue for medical bills after an accident is heavily limited.

Types of No-Fault Coverage

Most no-fault policy types are limited by state laws. You can’t buy each policy in any state. There are three types of no-fault insurance currently available:

True No-Fault Policies

True no-fault policies streamline and simplify the insurance process by removing your ability to sue for medical expenses. In a true no-fault state, you can only sue if your injuries are severe.

Each state has its own tort liability threshold, or minimum amount you must incur in damages before you can sue. In a true no-fault state, no-fault insurance is mandatory.

Choice No-Fault

In a choice no-fault state, you can choose between a regular auto insurance policy or a no-fault policy. Choice no-fault policies are only available in Pennsylvania, Kentucky and New Jersey.

Add-on Policies

Add-on policies allow drivers to buy no-fault personal injury protection plans without limitations or lawsuits. In add-on states, no-fault insurance isn’t required, so benefits may be lower than in true no-fault states.

How Much Does No-Fault Insurance Cost?

No-fault policies are mandatory in 9 out of the 12 states where they’re available.

No-fault insurance tends to cost more than regular car insurance because no-fault policies tend to have more payouts than regular policies. For example, Michigan, D.C. and Florida are all compulsory no-fault states — and are 3 of the top 6 most expensive states to drive in.

Why do no-fault states usually see higher car insurance premiums? No-fault states see much higher rates of car insurance fraud because there’s less investigation by police after an accident. In some states, fraud has gotten so out of control that legislatures have repealed no-fault statutes.

Michigan, the state with the most expensive car insurance, is the only no-fault state with no fraud watchdog group. Critics of no-fault insurance blame these mandates for high insurance prices.

No-fault mandates are just one of the many things that impact how much you’ll pay for car insurance.

Your car insurance premium is also determined by the type of car you drive, how much experience you have on the road, where you live, your age, your gender, and in some states, even your credit score. The average American pays $1,365 a year for car insurance, but what you’ll actually end up paying is heavily influenced by your state’s averages.

Who’s Required to Get No-Fault Insurance?

No-fault car insurance is required in the following states and territories: District of Columbia, Florida, Hawaii, Kansas, Massachusetts, Michigan, Minnesota, New York, North Dakota and Utah.

How to Get Coverage

Getting no-fault car insurance is similar to getting car insurance in at-fault states.

  • First, begin by researching companies in your area and request a few quotes. The more quotes you request, the higher your chances of finding the most affordable rate for you.
  • Your insurance provider will offer you a policy and tell you about premiums, discounts, deductibles, and benefits.
  • Once you’ve found a policy you like, request coverage through one of the company’s agents.
  • If you currently have car insurance, make sure you don’t cancel your current policy until after your new policy goes into effect.

The Best No-Fault Insurance

Finding a great no-fault insurance policy doesn’t have to be a hassle. Read on to learn everything you need to know about how to start shopping for a policy.

A few qualities you should look for in a no-fault policy include:

Affordable premiums. No-fault insurance tends to be more expensive than regular car insurance due to fraud issues. Look for a policy with affordable premiums, especially if you’re buying no-fault insurance.

Plenty of discounts. From earning great grades in high school to attending a defensive driving class, most insurance companies offer drivers a few ways to save on their premiums. Discounts and bundling deals can help offset the higher cost of no-fault insurance.

High maximum payout limits. Most no-fault insurance coverage policies have limitations on the amount they’ll pay out per accident or over a lifetime. Look for policies with high payout maximums. In some states like Florida, lawmakers have established limitations on how much an insurance company can offer in payouts to curb fraud. In these states, look for insurance providers who offer coverage up to state limits.

Best Overall: Nationwide

Nationwide is available in most states, even those that require drivers to hold no-fault insurance policies. Nationwide’s policies are comprehensive and there are many types of insurance protection available.

The insurance provider also offers a diverse range of discounts. From discounts for installing an anti-theft device to joining its SmartRide program and installing a driving monitor, Nationwide offers almost everyone a way to save.

Because Nationwide also offers home, business and life insurance as well as car insurance, you can even save up to $710 when you bundle your policies. This can make maintaining coverage more affordable for men and women who live in no-fault states.

The Hartford

If you’re an older driver, you know firsthand how much more expensive car it can be to insure your vehicle as a senior citizen.

In a no-fault state, drivers over the age of 55 can see car insurance rates that are much higher than their younger peers. The Hartford understands this and offers specialized car insurance policies for drivers who are a member of AARP. Its disappearing deductible policy allows you to save more over time by maintaining a clean driving record and it also offers first accident forgiveness for drivers who qualify.

The Hartford’s insurance is available in most states and its no-fault policies comply with state regulations.

Esurance

Are you moving to a no-fault state and need to up your coverage? Esurance can offer you additional discounts just by maintaining state-minimum coverage. Its Switch & Save discount knocks money off your premium just by switching from your current provider to Esurance. This can mean a big discount if you’re moving to an at-fault state where your current provider doesn’t offer coverage or even if you just aren’t satisfied with your current policy.

Esurance also offers a unique DriveSafe mobile app that monitors your driving habits and offers you discounts if you operate within your local driving laws. With photo claims, easy discounts, and more ways to save, Esurance can make insurance more affordable.

Additional No-Fault Providers in Your Area
Try 2-3 companies for the best comparison

Getting No-Fault Insurance is Easier than Ever

Whether you live in a no-fault state or you just need to find more affordable car insurance, it’s never been easier to lower your rate. When you’re shopping for car insurance, remember that each individual company uses its own formula to determine how much you pay.

It’s possible to get the exact same coverage from ten different companies at ten different price points. Don’t be afraid to shop around for no-fault coverage like you would for home, life, or business insurance — you never know how much you might save.