No Fault Insurance
No-fault insurance, also called personal injury protection or PIP, covers the medical expenses of you and your passengers in an auto accident, regardless of who the at-fault driver is.
What is no-fault insurance?
No-fault insurance is a type of auto insurance that provides coverage for medical bills, lost wages, and other expenses related to injured occupants of your car in no-fault states (we list ‘em below).
In a no-fault state, your own insurance company covers the medical expenses and damages of an auto accident regardless of who is at fault. Everyone involved in an auto accident has to file an insurance claim with their insurance company.
Your insurance policy will cover any medical bills up to the limits you pick when you sign up. However, another driver can file a third-party claim against your policy if their no-fault limits are not enough to cover the expenses for the injuries they sustained.
Do you live in a no-fault state?
The following states have no-fault laws for car insurance:
- New Jersey
- New York
- North Dakota
There are differences in the insurance laws within the states, though. For example some states also require that you carry uninsured or underinsured motorist coverage. Uninsured motorist or underinsured motorist coverage protects you if the other driver has no insurance, or not enough insurance to cover the costs to repair damage they’ve caused.
Note that insurance rates in no-fault states are typically higher since your insurer will have to pay out in the event of a car accident and can’t count on another insurance company for reimbursement.
What does no-fault car insurance cover?
No-fault car insurance covers hospital and medical costs from the car accident, lost wages if you can’t work while recovering, and funeral expenses. This only pertains to yourself, however, or anyone who was your passenger at the time of the accident.
Most state laws set minimum coverage limits for a no-fault insurance policy. If you file an insurance claim, your insurer will cover medical expenses up to those coverage limits (after you pay your deductible).
The minimum coverage limits might not be enough to pay for all the medical costs and other expenses of a car accident, and you might want to select higher no-fault coverage limits.
Choosing higher limits will raise your insurance premiums, so you have to find a balance between adequate coverage, an affordable deductible, and insurance rates. It’s a delicate balancing act, so give it some thought!
Understanding minimum coverage limits for no-fault auto insurance
Here’s a quick example of minimum coverage limits for no-fault insurance. In Florida, the minimum limit is $10,000 per person for no-fault coverage. This will pay out regardless of who is at fault for your medical expenses resulting from an accident. But this minimum limit can quickly be exhausted depending on the extent of your injuries.
Even if you have health insurance backing you up, it’s easy to see how the excess medical bills from an auto accident could quickly exceed the minimum $10,000 per person coverage. When selecting the PIP coverage on your no-fault policy, it’s a good idea to consider how much you could really afford to pay out for medical expenses as a result of an accident.
What Does No-Fault Car Insurance Exclude?
No fault coverage does not include insurance protection for injuries sustained by another party outside of your car (in other words, the driver of the other car, or a pedestrian standing nearby).
It also doesn’t cover any of the following, which would fall under different categories of coverage that you may or may not have chosen to add to your policy.
Property damage liability
Property damage liability covers the costs to repair any property damage from an accident, whether that’s car repairs or fixing a fence. This one is a legal requirement in all states but New Hampshire and Virginia (if you want to drive without insurance in those states you have to meet certain financial criteria, in the case of NH, or pay a $500 fee, in VA).
Collision insurance covers any damage to your own motor vehicle (unless the other driver carries liability insurance and they are the one who caused the accident).
The comprehensive insurance in your car insurance policy would cover any damages to your motor vehicle from theft, vandalism, or certain other perils.