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What Does No-Fault State Mean For Insurance? We Give You The Low Down On The Different Insurance Systems!

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There are a group of states within the USA that have a version of “no-fault” car insurance. This means that if you are injured in a car accident while driving or the passenger, your car insurance will cover for some of the damages, your medical bills, and lost earnings (if you can’t go to work because of your injuries). Let’s discuss ‘what does no-fault state mean for insurance’ and how this can affect your car driving experience. 

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Different Auto Insurance Systems

To get an understanding of ‘what does no-fault state mean for insurance,’ you need to be aware of the various insurance systems across the board. Twelve states and Puerto Rico have no-fault insurance laws, while seven other states use a monetary threshold when working with lawyers and deciding claims.


Furthermore, three states have a ‘choice’ no-fault law, meaning that motorists can reject the lawsuit threshold and sue for an auto-related injury if they feel it has caused significant bodily or structural damage. 


State auto liability insurance generally falls into four broad categories that are applicable to each state: no-fault, choice no-fault, tort liability, and add-on laws. The main differences when comparing these policies involve the user’s right to sue and if the policyholder’s insurer pays benefits, regardless of who is at fault in the accident. 


The no-fault system is used to reduce the cost of auto insurance by removing small claims out of the courts, making each insurance company pay for its own policyholders for minor injuries, no matter who caused the accident. By saying ‘no-fault,’ this is used to denote any auto insurance system where each driver’s company pays for losses, regardless of who was at fault in the accident. 


No-fault insurance covers the following: 

  • Medical expenses
  • Child care expenses
  • Lost income
  • Funeral expenses
  • Survivors’ loss
  • Household services 


Unfortunately for some car owners, the term ‘no-fault’ can be confusing and leave drivers with more questions than answers. Sometimes, no-fault refers to any auto insurance system where each driver’s insurance pays for losses, regardless of who caused the accident. In the strictest and most severe form, no-fault applies to states where there are restrictions on who has the right to sue. 


In this case, the insurance company pays first-party benefits, known as personal injury protection. The coverage extension varies depending on the state, with some states receiving compensation for medical fees and lost wages, while other states just provide money for hospital expenses, funeral expenses, and lost income.


Drivers who live in no-fault states may have to ask their insurance company ‘what does no-fault state mean for insurance’ when seeing what is covered under their plan! 

Choice No-Fault

The next kind of insurance you can purchase for auto coverage is a choice no-fault, which refers to a driver being able to choose either a no-fault auto policy or a traditional tort liability policy. 


There are three choice no-fault states that use this auto insurance:

  • Kentucky: Consumers can sue someone at fault by filing a form with the state department. 
  • New Jersey: Consumers can use the ‘unlimited right to sue’ insurance.
  • Pennsylvania: Consumers can use the ‘full tort’ policy and opt out of the no-fault system. 

Tort Liability

The third kind of auto insurance means there are no restrictions on lawsuit, with policyholders at fault in a crash having the potential to be sued by other drivers and paying for pain and suffering after the accident. In this case, when researching ‘what does no-fault state mean for insurance,’ you need to be aware that owners might have to pay for out-of-pocket expenses.


The last kind of auto insurance features drivers receiving compensation from their own insurance company and avoiding any restrictions on lawsuits. In this case, ‘add-on’ means that benefits can be added to the traditional tort liability insurance coverage. 

What is a no-fault car insurance claim?

A no-fault car insurance claim you make together with your car insurer for payment of medical bills in the event of an accident, lost potential earnings, and other damages that you had to pay for out of pocket, like repairs and replacements on the car. One of the main characteristics and schemes of this claim is that you cannot get paid or reimbursed for the ‘pain and suffering’ as part of your insurance claim.

Special Circumstances of a No-Fault Claim

You can only ‘break’ the rules of a no-fault state and file an insurance liability claim for a personal injury lawsuit against the driver who committed the accident against you if the medical bills get to a certain point (aka, if they are high enough). In addition, you can break the rules of the no-fault state if your injury is considered extremely serious under your state’s criteria.

  • For example, when looking at ‘what does no-fault state mean for insurance,’ you need to be aware of what injuries in your certain state quality for medical insurance coverage. If your state’s no-fault law prohibits a personal injury claim unless the driver at fault has medical bills over $3,000, this is a key part of information to know before filing a claim.

Examples of No-Fault State Claim

If you get into a car accident in a specific state, like New York, and the other driver was at fault,  then you have a right to some money and compensation. If you injure yourself in the accident and have a broken arm, you might have upwards of around $8,000 in just medical bills!


For you to ‘break’ the rules of the no-fault system and bring a claim to the driver who injured you in New York, your claim has to be considered a “serious injury” and be placed under this category when filing the claim. However, if your injury is not expensive or serious, you cannot file for this as it will be fraud. The following can work for citing a no-fault serious injury claim:

  • Disfigurement
  • Bone fracture
  • Limitation of body organ or member
  • Significant limitation of use of body function or system, or
  • Full disability for 90 days

If your injuries fall under one of the aforementioned categories, you can file a liability claim or personal injury lawsuit that directly is against the at-fault driver and not the state of New York. This claim will demand compensation for the medical injuries, pain and suffering, and any other losses. However, if you suffered minor injuries, you will have to continue looking at ‘what does no-fault state mean for insurance.’ 

Cooperate With Your Insurer!

When researching ‘what does no-fault state mean for insurance,’ you need to follow the rules when dealing with your insurance company for your personal injury case. In some instances, the personal injury case will not work for your certain accident scenario. 

  • For example, you will typically find that you shouldn’t provide a recorded statement of what happened in the accident to the ‘other side’s’ (the driver’s) insurance company. 
  • However, in a normal no-fault claim, state law usually requires you to cooperate with your insurance to work together and provide the necessary details, such as a recorded statement, medical examination by a selected physician, or other extras. 

Is No-Fault Insurance Effective?

When trying to answer the question of ‘what does no-fault state mean for insurance,’ you need to be aware of the effectiveness of this car policy. Insurers typically favor laws that provide thresholds and limits on lawsuits, instead of dollar and monetary thresholds. One of the main negatives of having the monetary limit for medical expenses is the potential for fraudulent claims.


There is a wide range in monetary thresholds and other benefits provided in the no-fault state insurance. One problem is that certain states have a higher PIP benefit threshold than other options. This means that some dishonest providers have found ways to change the system, meaning that no-fault states could be causing further issues.

Fraud and PIP Benefits

In some no-fault insurance states, PIP coverage might be exploited by fraudulent business owners and companies. In this case, owners may experience phony calls, corrupt physicians, and unfair lawyers who do not treat people or the system fairly. 


These criminal groups who misuse the PIP benefits and the no-fraud state system have hurt the insurance company policy in the country. 

How Much is No-Fault Insurance?

No-fault insurance costs a little bit below $900 per year for state-minimum coverage, with the exact cost depending on various factors like your state, coverage, driving history, and your insurance provider. 

The Bottom Line

As you can see, the no-fault state insurance can be quite confusing if you have never had car insurance or made a claim in the past. When looking at ‘what does no-fault state mean for insurance, you need to know the different auto insurance systems, the differences between no-fault and choice no-fault, and if the no-fault car insurance is effective. 


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