No-fault Insurance Coverage Explained



What is no-fault insurance?

No-fault insurance, also called PIP (Personal Injury Protection) is car insurance that doesn't care who caused the collision. It doesn't matter whether you were at fault, and you don't have to prove the other driver was at fault. With no-fault insurance, you just contact your own insurance company, and it pays you directly for your losses. No-fault insurance falls under your state's liability law.

No-fault insurance differs from traditional liability insurance. If you live in a traditional liability state, instead of turning to your own insurance company to pay for your losses, you must instead turn to the at-fault driver's insurance company to pay.

With liability insurance, fault does matter. Under state liability law, to receive compensation for your losses, you have to convince the at-fault driver's insurance company its insured caused the accident.

How do you know whether you have no-fault insurance?

There are 12 no-fault insurance states.* (The states of New Jersey, Pennsylvania, and Kentucky give you a choice between no-fault insurance or traditional liability insurance.) If you live in one of these states, your car insurance is no-fault:

Florida
Hawaii
Kansas
Kentucky
Massachusetts
Michigan
Minnesota
New Jersey
New York
North Dakota
Pennsylvania
Utah

* Although not a state, Puerto Rico is also a no-fault insurance U.S. territory.

What No-fault Insurance Covers

No-fault insurance will pay for your medical, chiropractic and therapy costs, your lost wages while you recover, funeral expenses, and death benefits. The amount it pays depends on how much insurance you purchased. Some people pay a higher premium to have higher limits. To know how much insurance you have, check the declaration page on the front of your insurance policy. If you can't find the declaration page, call your insurance company.

What No-fault Insurance Doesn't Cover

No-fault insurance does not cover pain and suffering, or emotional distress. You're also not allowed to file a civil lawsuit against the at-fault driver for your pain and suffering. No-fault doesn't cover repair bills for your car or for personal property inside the car damaged during the accident.

Pros and Cons of No-fault Insurance

Pros

  • No-fault insurance pays you regardless of who's at fault.
  • The company guarantees payments for your covered losses.
  • You usually don't need an attorney.
  • Your claim is processed and paid much faster than in a liability insurance state.

Cons

  • There are various exceptions to no-fault insurance coverage. Each state's liability law has its own version of no-fault. You have to read your policy carefully or contact the insurance company to know exactly what is covered and what isn't.
  • There's no coverage for pain and suffering.
  • Insurance premiums are generally higher in no-fault states.
  • No-fault doesn't cover repair bills for your car, or any personal property damaged in the accident.

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