No-Fault Car Insurance: How It Works and Which States Require It
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Written byJ.J. Starr
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J.J. Starr is an insurance and personal finance expert who has been writing for Compare.com since 2022. Her work has been published across the web, appearing on sites such as Insurify.
Prior to writing for Compare.com, J.J. was a registered banker and life insurance consultant, holding a Series 6, FINRA, and life insurance license. She also earned a master’s degree in writing from New York University.
J.J. has a passion for helping people save money by explaining complex topics like car insurance in a way that is simple and easy to understand.
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Edited byLequita Westbrooks
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Lequita WestbrooksSenior Editor
Lequita Westbrooks is an insurance editor at Compare.com. Her writing and editing experiences span several industries, including insurance, personal finance, higher education, and more. She excels at explaining complex topics like auto insurance in simple, easy-to-understand language and is passionate about helping readers save money. Lequita graduated from the University of South Florida, where she earned her Bachelor’s degree in English.
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Table of contents
No-fault insurance means you file claims with your own insurance companies for medical expenses and lost wages, regardless of fault. Introduced in the 1970s to reduce litigation and streamline the claims process for minor injuries, it’s now mandatory in some states — such as Florida and New York — and optional in others.
While it simplifies auto accident recovery, no-fault insurance often means higher premiums due to the increased risk that insurance companies face. In this article, we’ll explore how no-fault insurance works, its costs, and which states require it.
By the end, you should have a clear idea of whether you need no-fault coverage and how to save money on your policy.
What Is No-Fault Insurance?
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With no-fault insurance, each driver’s insurance covers their medical expenses and sometimes other costs — like lost wages — after an accident, regardless of fault. Unlike “at-fault” or “tort” insurance systems, no-fault eliminates the need to prove who’s caused an accident, which simplifies the claims process.
Florida, Michigan, New York, and other states operate under no-fault laws. While it speeds up claim payouts, no-fault insurance may lead to higher insurance premiums overall, according to Michael Barry, spokesman for the Insurance Information Institute.
Let’s look at some pros and cons of the no-fault insurance system:
Pros
Faster claim payouts
Reduces legal disputes over fault
Cons
Potentially higher premiums
Limited ability to sue for damages
How No-Fault Insurance Works
Under no-fault insurance, if you get into an accident, you’ll file a personal injury protection (PIP) claim with your insurer to get coverage for medical expenses and lost income.
Personal injury protection is mandatory in no-fault states and ensures you receive prompt payments for your injuries without waiting for authorities to determine fault. The coverage limits vary by state — for example, Florida requires a minimum of $10,000 in PIP coverage, Minnesota requires $40,000, and Maryland requires at least $2,500.
While PIP covers injury-related costs, it doesn’t cover vehicle or other property damages. The at-fault driver’s insurance will cover that: collision coverage for their car and property damage liability coverage for everyone else’s.
Next, we’ll discuss how state thresholds for no-fault insurance affect claims.
State thresholds for no-fault insurance
No-fault states have varying thresholds before tort liability (suing the at-fault party) comes into play. Thresholds can be monetary, where a claim must exceed a specific dollar amount, or verbal, where severe injuries must meet specific criteria, such as a “permanent disability.”
For example, New Jersey and Pennsylvania use verbal thresholds, while Kentucky sets monetary limits for injuries.
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What No-Fault Insurance Covers
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No-fault insurance covers your and your passengers’ medical expenses and lost wages after an accident, regardless of fault. But it doesn’t cover your car or the other driver’s vehicle (or other property).
The table below breaks down what no-fault insurance covers and what it doesn’t.
What It Covers
Medical bills (up to PIP limits)
Lost wages
Rehabilitation costs
Funeral expenses
What It Doesn’t Cover
Vehicle repairs
Property damage
Pain and suffering (unless you meet thresholds)
Now that we’ve covered the basics, let’s explore the differences between PIP and other insurance coverages, starting with liability insurance.
PIP insurance vs. liability insurance
In no-fault states, personal injury protection covers your medical expenses, lost wages, and other injury-related costs after an accident, regardless of who was at fault. It protects you and your passengers from facing costly medical expenses.
If you’re at fault for an accident in a “tort” state, liability insurance — specifically bodily injury liability protection — covers the other driver’s medical expenses, while property damage liability covers their property damage. Unlike PIP, your liability insurance only compensates the other party, never you.
PIP vs. medical payments coverage
Some states require PIP, and some require medical payments coverage (MedPay). Both cover medical expenses resulting from a car accident, but they differ in scope. Personal injury protection covers not only medical costs but also lost wages, rehabilitation costs, and sometimes funeral expenses.
MedPay only covers medical treatments for you and your passengers, including ambulance fees, medical treatments, dental procedures, X-rays, diagnostic tests, and insurance deductibles. But it doesn’t cover lost income or other personal costs. It usually tends to have lower limits than PIP too.
States With No-Fault Auto Insurance Laws
“True” no-fault states require you to have PIP insurance, and they restrict your right to sue for damages unless your injuries exceed a certain dollar amount or severity. This system aims to streamline claims and reduce lawsuits.
The table below provides a list of states that require PIP and the details of minimum PIP limits.
No-Fault Insurance State  | PIP Minimum Requirements |
|---|---|
| Florida | $10,000 per person |
| Hawaii | $10,000 per person |
| Kansas |
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| Kentucky | $10,000 per person |
| Massachusetts | $8,000 per person |
| Michigan |
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| Minnesota |
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| New Jersey |
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| New York |
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| North Dakota | $30,000 per person |
| Pennsylvania | $5,000 per person (called “medical benefits coverage”) |
| Utah |
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Some states — like North Dakota, Massachusetts, and Hawaii — use a simple structure that caps payouts per person per incident. Other states — like New York, Utah, and Kansas — have more complicated rules with different sublimits for various parts of PIP coverage, such as a minimum death benefit.
Always review your state’s minimum coverage requirements to make sure you buy the right coverage and limits.
Now, let’s explore the difference between choice no-fault states and add-on no-fault states.
Choice no-fault states
In “choice no-fault” states, you can choose between no-fault insurance and traditional tort-based insurance. This flexibility lets you decide how you want your insurance company to handle claims — either limiting or enabling you to sue for damages after an accident.
Three states offer choice no-fault insurance: Kentucky, New Jersey, and Pennsylvania. New Jersey and Pennsylvania use a verbal threshold for no-fault claims (which limits lawsuits based on injury severity), while Kentucky applies a monetary threshold (which limits lawsuits based on a dollar amount).
Additionally, Michigan allows some Medicare enrollees to opt out of the no-fault system.
Add-on no-fault states
In “add-on no-fault” states, you can purchase no-fault benefits, such as PIP, without limiting your right to sue after an accident. After an accident, you could receive a payout from your insurance company and file a lawsuit for damage.
The following 10 states (and one district) use an add-on no-fault system:
In Arkansas, Delaware, Maryland, and Oregon, PIP coverage is a required coverage; in the other states, it’s optional.
How No-Fault Insurance Claims Work
The no-fault insurance claims process is pretty straightforward. No matter who causes an accident, you’ll file an insurance claim to cover your medical bills and lost wages with your insurance company.
If you’re at fault, no-fault insurance doesn’t cover the other party’s property damage, but your liability coverage does. Injured parties can sue you in severe cases where damages exceed state thresholds.
To file a claim, report the accident to your insurer, and submit driver information, license plates, and relevant documents, like police reports and medical bills. Review your insurance company’s process to make sure you do things right the first time. Limitations include coverage caps based on state laws and your policy’s limits.
Insurers can deny your claim if you fail to report the accident promptly, miss deadlines, or provide incomplete documentation. Fraudulent claims can also lead to denials.
How Much Does No-Fault Car Insurance Cost?
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No-fault car insurance generally costs more than at-fault or full tort coverage due to the added expenses of PIP benefits. Because any car accident can result in a payout from your insurance company, the company needs to charge more to cover its risk.
The average cost in no-fault states is $171 per month, compared to $149 per month in at-fault states, according to Compare.com data. But your cost will vary based on your insurer, location, and coverage levels. To get the best rate for your situation, compare personalized quotes from multiple insurance companies.
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How to Buy No-Fault Insurance
When buying no-fault insurance, it’s essential that you choose the coverage limits that best protect you and your finances. While buying the state’s minimum coverage might cut costs up front, it can leave you vulnerable to high out-of-pocket costs after an automobile accident.
That’s why many experts recommend increasing coverage limits to better protect against significant medical bills. Here are a few tips for buying no-fault insurance:
Understand your state’s requirements: Review your state’s department of motor vehicles website for information on its auto insurance laws.
Choose the right deductible: A higher deductible lowers your premium but increases out-of-pocket costs if you file a claim.
Review who and what it covers: Make sure your insurance policy provides adequate coverage for you and your passengers.
Increase coverage limits: Increase your limits to get extra financial protection in case of serious injury (it’s usually still affordable).
Compare quotes: Get quotes from several top companies to uncover the best rate for your needs and preferences.
No-Fault Insurance FAQs
To help you understand how no-fault insurance and PIP work, here are answers to some common questions.
Is no-fault insurance required by law?
Yes, 12 U.S. states use no-fault insurance laws, including Florida, New Jersey, and New York. Tort states use a different fault system that requires at-fault drivers to cover some or all of the medical expenses with their insurance company.
Does personal injury protection raise your car insurance rates?
Yes, adding PIP coverage can raise your car insurance rates. Since insurers must pay for medical expenses and other related costs regardless of fault, it increases the overall risk. It often leads to higher premiums, especially compared to states without mandatory PIP.
Can you remove PIP from your insurance?
Most no-fault states require PIP by law, so you can’t remove it from your policy. But, in some at-fault or add-on no-fault states, you may be able to reject or reduce PIP coverage. Consider carefully what your health insurance can and can’t cover before removing PIP.
Which at-fault states require personal injury protection?
By definition, an at-fault state requires the at-fault driver to pay for the injuries and damage they cause. Arkansas, Delaware, Maryland, and Oregon are at-fault states that require PIP coverage, allowing you to get coverage for medical expenses through your own insurers but still reserve the right to sue the at-fault party. Other at-fault states, including Texas and New Hampshire, offer it as an option, where you can waive the PIP requirement typically by signing a formal rejection.
Data Methodology:
Data scientists at Compare.com analyzed more than 50 million real-time auto insurance quotes from more than 75 partner insurers in order to compile the rates and statistics seen in this article. Compare.com’s auto insurance data includes coverage analysis and details on drivers' vehicles, driving records, insurance histories, and demographic information.
All the rates listed in this article have been collected from a combination of real Compare.com quotes and external insurance rate data gathered in collaboration with Quadrant Information Services. Compare.com uses these observations to provide readers with insights into how auto insurance companies determine their premiums.
Sources:
Insurance Information Institute, “Background on: No-fault auto insurance,” Accessed September 23, 2024.
MoneyGeek, “States With No-Fault Auto Insurance Laws,” Accessed September 23, 2024.
Texas Office of Public Insurance Counsel, “Understanding PIP vs Med-Pay,” Accessed September 23, 2024.
Stateline.org, “Is No-Fault Auto Insurance to Blame for High Rates, Fraud?,” Accessed September 23, 2024.
Insurance Business Magazine, “Personal injury protection insurance – a state-by-state guide,” Accessed September 24, 2024.
Thompson Law Injury Lawyers, “Fault vs. No-Fault Insurance Laws by State in the United States,” Accessed October 1, 2024.
Stateline, “Is No-Fault Auto Insurance to Blame for High Rates, Fraud?,” Accessed September 24, 2024.
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J.J. StarrInsurance Writer
J.J. Starr is an insurance and personal finance expert who has been writing for Compare.com since 2022. Her work has been published across the web, appearing on sites such as Insurify.
Prior to writing for Compare.com, J.J. was a registered banker and life insurance consultant, holding a Series 6, FINRA, and life insurance license. She also earned a master’s degree in writing from New York University.
J.J. has a passion for helping people save money by explaining complex topics like car insurance in a way that is simple and easy to understand.
Lequita WestbrooksSenior Editor
Lequita Westbrooks is an insurance editor at Compare.com. Her writing and editing experiences span several industries, including insurance, personal finance, higher education, and more. She excels at explaining complex topics like auto insurance in simple, easy-to-understand language and is passionate about helping readers save money. Lequita graduated from the University of South Florida, where she earned her Bachelor’s degree in English.