No-fault car insurance requires that every driver file a claim with their own insurance company after an accident, regardless of who is 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 perks do exist, the truth of the matter is more complicated than it seems.
No-fault laws vs. the tort system
Auto insurance is traditionally 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. As Cornell’s legal dictionary puts it, tort is "a civil wrong which can be redressed by awarding damages."
In states using the tort system, responsibility for damages paid to an injured party are assigned to the at-fault driver — or in some cases, the driver deemed more at-fault. If anyone involved in the accident disagrees about where fault should rightfully be placed, they — or their insurance company — can sue for monetary compensation to pay for damages.
With no-fault car insurance, each driver uses their own auto insurance coverage to pay for their damages, regardless of who caused the accident. This precludes drivers from suing another party — with some exceptions, depending on the severity of injuries* — in civil court. This also means that you don’t have to wait for the resolution of a lengthy and potentially costly lawsuit before being reimbursed for your medical expenses.
Which states have no-fault insurance laws?
There are 12 no-fault car insurance states in the US:
- New Jersey
- New York
- North Dakota
In nine of these states, electing no-fault coverage is compulsory. But in Kentucky, New Jersey, and Pennsylvania, you may choose no-fault insurance or traditional full tort coverage.
What does no-fault auto insurance cover?
No-fault coverage pertains only to bodily injury. In states with no-fault insurance laws, all drivers are required to purchase personal injury protection (PIP) coverage. You will need liability and collision coverage to cover damages to another driver'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, it's worth shopping to ensure you're not paying too much for your coverage.
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