What is no-fault insurance and how does a claim work?

Searching for car insurance can be a tedious process, but it’s essential to protect you from unexpected expenses after an accident or bad weather. You can purchase no-fault auto insurance in 12 states, but what does no-fault insurance mean? No-fault car insurance means that your insurance will pay for your medical bills, no matter who was at fault after an accident. In other insurance systems, the insurance company of the at-fault driver will have to pay both parties.

No-fault insurance lets drivers avoid costly, stressful court battles. In this article, we’ll talk about what no-fault insurance covers, which states require it, how it works, how much it costs, and what to look for when choosing no-fault insurance.

What is covered by a no-fault insurance policy?

There are two different types of no-fault insurance, although only one is in use in the U.S.

With pure no-fault insurance, your insurance company pays for all of your damages, including medical and lost wages. This means there’s no need to sue.

The states with no-fault laws use a modified no-fault system instead. Drivers need insurance up to a certain limit and if their damages are beyond the state limit and they didn’t opt for additional coverage, they can sue an at-fault driver. However, people in modified at-fault states can’t sue for pain, suffering, or other personal claims below the limit. This helps limit legal expenses and get car insurance payments to drivers faster. It also keeps people from spending insurance payouts on legal fees.

We should point out that you will still need property damage liability insurance in no-fault insurance states. This is the insurance that will pay for damage to someone else’s property if you cause a collision. 

Is no-fault insurance required by law in some places?

No-fault insurance is required by law in 12 states and Puerto Rico. Here are a few examples of what some states require and what that means:

• New Jersey, Florida, Michigan, Pennsylvania, and New York have verbal thresholds. This means that people can only sue when damage exceeds a verbal limit. For example, people in some states can only sue after an injury that causes a permanent disability. It is called a “verbal” threshold because the limit is not a defined monetary sum, but instead by the nature of your injury. 
• In Hawaii, Kansas, Kentucky, Massachusetts, Minnesota, North Dakota, and Utah, there’s a monetary threshold instead. Drivers can only sue when their monetary damages are more than the threshold, which is expressed as a dollar amount. This helps keep court costs low and leaves more money for injured people.
• New Jersey, Pennsylvania, and Kentucky have “choice” no-fault car accident claim laws that let motorists choose no-fault insurance or reject the lawsuit threshold and keep the right to sue after an accident whether or not the total damages exceed a verbal or monetary threshold.

In add-on states, you can add additional coverage for when someone else is at fault, but the benefits might not be as substantial as in no-fault states.

How does no-fault insurance work if you need to file a claim?

With a no-fault claim, your insurance company pays for any medical bills no matter who was at fault in a crash you are involved in. No-fault states have fewer legal disputes over car accidents, and they help people get their insurance payments faster, without spending as much money on lawyers. (For more information, read our “The Car Accident Claims Process“).

If you have a car accident, call your local police station and file a report as soon as possible. Record the officer’s name and badge number, and take some pictures of the damage. When you file your insurance claim, it should include:

• The driver’s name
• The owner’s name
• The policy number
• Names and contact information for witnesses and any passengers
• Your car’s location right after the accident or other incident

To make your insurance payout as high as possible, include as much information as you can.

How much does no-fault insurance cost?

The answer to questions like, “How much is no-fault insurance?” can be complicated. No-fault insurance often costs more than other types of insurance. People with no-fault insurance have less recourse to be paid for non-economic damages like pain or suffering.

The cost of no-fault insurance, which usually means personal injury protection (PIP) varies by state and by the amount of coverage you choose.

There are always unique circumstances for every driver, as well as other insurance discounts available that can lower your rates. 

What to Look for When Getting No-Fault Insurance

A policy from a company with the financial stability needed to pay your claims promptly can give you the protection you need. Search for an insurer that also has low rates and good customer service. No-fault insurance requirements and coverage types vary from company to company, and state to state.