No-fault car insurance requires that every driver file a claim with their own insurance company after an accident, regardless of who was at fault.
At face value, no-fault insurance almost sounds too good to be true. Insurance that kicks in no matter who is at fault? Sign us up! And while there are certainly real perks, as with all things: The truth of the matter is more complicated than it seems.
No-Fault Laws Vs. the Tort System
First, let’s start with what the traditional kind of auto insurance is based on, the tort system. A tort is an action that results in injury to another person or their property leaving the afflicted party entitled to compensation, or as Cornell’s legal dictionary puts it: A civil wrong which can be redressed by awarding damages.
In states using the tort system, the damages paid to an injured party are determined by who is at fault, or in some cases, who is more at fault. If anyone involved in the accident disagrees about where fault should rightfully be placed, they or their insurance companies can sue for monetary compensation to cover any injuries and/or property damage.
With no-fault insurance, each driver pays for their own injuries— with their own car insurance policy—regardless of who may have caused the accident. This means that you lose the ability to file suit against another party (with exceptions depending on the severity of injuries*) in civil court. On the flip side, this also means that you don’t have to wait for a lawsuit (which are often costly and long, drawn out affairs) to be settled in order to be reimbursed for your medical expenses.
What States Have No-Fault Laws?
Currently, 12 states have no-fault insurance laws: Florida, Hawaii, Kansas, Kentucky, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Pennsylvania and Utah. In nine of these states, declining no-fault coverage is not an option. But in Kentucky, New Jersey and Pennsylvania, you may select between no-fault insurance or the traditional full tort coverage depending on your own preference.
What Does No-Fault Insurance Cover?
An important fact to keep in mind is that no-fault coverage pertains only to bodily injury. This is why in states with no-fault insurance laws, all drivers are required to purchase personal injury protection. Just like in other states, you will need liability and collision coverage to cover damages to another person’s vehicle and to your own, respectively.
How Much Does No-Fault Insurance Cost?
Whether you live in a no-fault or full tort state, you can save by comparing hundreds of carriers at TheZebra.com to find the best possible quote.