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No-Fault Car Insurance Explained

  January 21st, 2019  By Maggie Overholt

What is PIP insurance?

A handful of states have “no-fault” auto insurance laws, which means your own insurer must pay for your and your passengers’ injuries after an accident — no matter who caused it. No-fault states require drivers to purchase personal injury protection (PIP) as part of their car insurance policy. The PIP limit you select dictates the maximum amount your insurer will reimburse you for injuries on any given claim.

No-Fault States

Twelve states are true no-fault states that require PIP for all drivers. A few more require insurers to offer PIP coverage, but drivers may reject it in writing if they choose. Hover over blue states for more information about their unique no-fault laws.

= PIP is not required and insurers are not required to offer it
= Insurers must offer PIP but drivers can opt out of the coverage
= PIP is required for all drivers

What does PIP cover?

Personal injury protection, or PIP, is required in no-fault states. This coverage mandates that your own insurer will pay for your injuries (or your passengers’ injuries) after an accident. So what exactly does PIP pay for?

  • Medical expenses — All PIP plans cover medical expenses for the driver and/or passengers, which can include hospital bills, medication, rehab, and other injury-related costs.

In some states, PIP also covers:

  • Lost wages — Some PIP plans will partially reimburse the driver for lost wages if they’re injured in an accident and unable to work while recovering.
  • Loss of service — Loss of service coverage pays for work that must be outsourced after an accident; for example, if the driver needs to hire someone to do housework or watch their children while they recover.
  • Funeral expenses — PIP may also cover a set amount for funeral expenses after a fatal car accident.

In states where PIP insurance is available but not required, drivers may be able to pick and choose from the options listed above.

What doesn’t PIP cover?

PIP only covers costs related to physical injuries; it won’t pay to repair or replace your car if it’s damaged in an accident. Drivers in no-fault states should make sure they have enough property damage liability insurance in addition to PIP, and may want to think about adding collision or comprehensive insurance to protect their own vehicle.

What’s a “true” no-fault state?

There are 12 states with strict no-fault laws. On top of requiring PIP, these states limit drivers’ rights to sue after an accident (what’s known as “limited tort” liability law). Under limited tort law, drivers may only sue the person who caused an accident if their pain and suffering exceed what could reasonably be paid for by their PIP.

There are two different systems for determining when a driver in a no-fault state is allowed to sue the other person after a car accident.

  • The verbal threshold system determines the severity of losses in descriptive terms; for example, if the driver ends up with a broken bone or lasting disability. Verbal thresholds are used in Florida, Michigan, New Jersey, New York, and Pennsylvania.
  • The monetary threshold system sets a certain dollar amount that injuries must surpass before drivers are allowed to sue. Monetary thresholds are used in Hawaii, Kansas, Kentucky, Massachusetts, Minnesota, North Dakota, and Utah.

The logic underlying PIP and limited tort law go hand-in-hand. By requiring insurers to cover their own customers’ injuries, and by limiting the circumstances under which drivers can sue, these states aim to keep the bulk of claims out of the court system. This is meant to reduce the cost and time drainage of determining liability in court.

Filing Claims in a No-Fault State

PIP claims are filed with your own insurer, who will then pay for medical bills and other related costs. By contrast, the traditional liability system generally requires you to submit a claim with the other driver’s insurer and prove that that person was at fault. The no-fault or PIP process is meant to be more streamlined and cost-effective, providing drivers with their settlements as quickly and painlessly as possible.

That said, payouts aren’t guaranteed in no-fault states. You’ll still need to prove the extent of your injuries to your insurer, which may include getting a medical exam from an approved physician. Make sure to ask lots of questions and cooperate with your insurance company throughout the claims process — in rare cases, not following the right procedure could give an insurer grounds to deny someone’s claim.

What’s Next?

  • Each state has unique car insurance requirements. Along with PIP, your state mandates the amount of liability insurance you must buy and whether you need to tack on extras (like uninsured/underinsured motorist coverage). See our state-by-state guide for more information about car insurance laws where you live.
  • If you’re all caught up on car insurance laws and ready to start shopping, check out this list of the top 20 car insurance companies in the U.S. We rated each provider based on its financial strength, claims process, and customer service, so you can see how the big names in the industry compare with one another.

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