What is No-Fault Car Insurance? | Auto Insurance

No-fault car insurance is also known as personal injury protection (PIP), and it is a requirement for drivers in several states. This type of insurance is designed to cover medical expenses in the event that you or your passengers are hurt in an auto accident, regardless of whether or not you are responsible for causing the crash.

With no-fault insurance (sometimes called personal injury protection or PIP), your medical and hospital bills and those of your passengers are covered up to the limits of your policy, minus any applicable deductible. It may also include coverage for lost wages, burial and funeral costs, and more, depending on the insurer and the state you live in.

No-fault insurance does not compensate you in the event that your vehicle is stolen or vandalized, nor does it cover damage to your automobile or to others’ personal property in the event of a collision. However, it does limit your ability to sue for damages in most cases.

Personal injury protection or no-fault coverage is required in a dozen states and optional in several others. Minimum coverage amounts vary by state but range from less than $5,000 up to $50,000, and you may be able to increase that amount up to a certain limit.

Let’s say your car collides with another vehicle and you and the other driver both receive minor injuries. In a state where no-fault insurance is required, you would file a claim with your own insurer in order to receive compensation for your medical expenses. The other driver would have to do the same with their insurance company. It doesn’t matter who may have been responsible for the crash, because with no-fault insurance there’s no need to file a claim against the other person’s insurance.

Coverage levels for personal injury protection (PIP) vary from state to state. In Kansas, one of the 12 “no-fault” states where such insurance is required, the minimum coverage amount required is $4,500. Contrast that with Michigan, another “no-fault” state. Drivers in that state must carry a minimum of $50,000 in coverage.

If you or your passengers are hurt badly in a crash and you want to sue the other driver in court for damages, certain standards apply. Your medical expenses will either have to exceed a certain dollar limit (this is called a monetary limit) or reach a certain degree of severity, such as being disabled, disfigured, or killed (this is called a verbal threshold). This varies among states. Hawaii, Kansas, Kentucky, Massachusetts, Minnesota, North Dakota, and Utah use a monetary threshold. The other five no-fault states use a verbal threshold, according to the Insurance Information Institute (III).

Details vary among insurers and policies, but no-fault insurance coverage can include:

  • Medical bills: This includes hospitals, doctors and other related expenses for anyone in the vehicle who was injured.
  • Housekeeping services: Your policy may reimburse you for the cost of hiring someone to take care of domestic chores you’re unable to perform yourself because of an injury.
  • Lost wages: Some insurers may compensate you a set percentage of your salary or a fixed amount if you’re unable to work.
  • End-of-life expenses:  Cremation, funeral, or burial costs may also be included

Although no-fault car insurance is a form of vehicle coverage, you don’t have to be driving at the time of the incident to qualify for compensation. In most cases, no-fault insurance coverage also includes medical payments if you were hit by a vehicle while riding a bike or walking, for example.

What Doesn’t No-Fault Insurance Cover?

No-fault insurance isn’t a sweeping type of coverage. It only focuses on medical and injury-related expenses for yourself and your passengers. In most cases, personal injury protection or no-fault insurance coverage does not include:

  • Property damage
  • Deliberate or criminal acts
  • Other parties’ medical expenses

Is No-Fault Insurance Required?

Unlike liability insurance – which is required in all states but Virginia and New Hampshire – only a handful of states mandate no-fault insurance or personal injury protection (PIP), according to the Insurance Information Institute (III). The minimum amount of coverage required per person varies from state to state (higher limits may be available) and are as follows:

  • Florida: $10,000
  • Hawaii: $10,000
  • Kansas: $4,500 
  • Kentucky: $10,000
  • Massachusetts: $8,000
  • Minnesota: $40,000
  • Michigan: $50,000
  • New Jersey: $15,000
  • New York: $50,000
  • North Dakota: $30,000
  • Pennsylvania: $5,000
  • Utah: $3,000

In three of these states (Kentucky, New Jersey and Pennsylvania) drivers have the option of purchasing either no-fault insurance or carrying traditional car insurance, which does not limit your right to sue or to be sued in court for damages related to a collision.

How Much Is No-Fault Car Insurance?

The premium for a no-fault auto insurance policy depends on a number of factors, including where you live, your driving record, your age and gender, desired coverage levels, and deductible amounts. With so many variables, the best way to find out how much no-fault insurance would cost is to get a quote from your current insurer as well as two or three other companies.

How Do You Buy No-Fault Insurance?

If you live in a state where personal injury protection is required or optional, buying no-fault insurance is fairly simple. Before you buy, there are a few points you should consider to ensure you get the best coverage at the lowest price.

Know how much you need

As detailed in the list of no-fault states, each one has its own requirements of how much coverage you are required to have. However, the requirement is only a minimum amount. If you live in a state that requires a relatively low minimum amount of personal injury protection – and depending on what kind of health insurance you have, if any – you may want to consider purchasing additional coverage if you can afford to do so.

Understand what’s covered

PIP insurance isn’t a one-size-fits-all solution to car insurance. It only covers medical expenses for the parties in your vehicle. Most states require you to carry a minimum amount of liability car insurance to pay for damages to other people’s property (such as their vehicle) and medical bills. Collision insurance, which is optional, takes care of repairs to your own vehicle.

There’s a deductible

When factoring in the cost of no-fault car insurance, don’t forget about the deductible. It’s the amount you must pay out of pocket before your vehicle insurance steps in to pay the rest. A typical deductible amount is $500 or $1,000, but the amount varies by state.

Shop around

As with any type of car insurance, getting multiple quotes is worth the effort. The same coverage could be considerably cheaper with one carrier.

No. No-fault insurance covers medical expenses for you and any other passengers in your automobile, regardless of who may have caused the crash. Bodily injury liability insurance covers the occupants of other vehicles involved in a collision in the event that you are at fault.

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