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What is no fault auto insurance?

No fault auto insurance refers to one or both of two kinds of coverage: medical payments and damage costs.

Whether a state is a no fault state or a tort state impacts the way accidents are dealt with and the right to sue. If your state of residence is a no fault insurance state it’s definitely important to understand what it means for your car insurance coverage.

No fault insurance can refer to the medical payments coverage on your auto policy. This meaning is pretty standard. If someone riding in the vehicle is injured during an accident the medical payments coverage pays for treatment of those injuries regardless of who caused the accident.

This usually includes even the driver. When you consider things like whiplash and other common injuries from accidents that don’t do obvious damage such a broken bone, but are painful problems that can take years to heal, medical payments coverage on your auto policy is a great benefit.

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What is the difference between a tort state and a no fault state?

The basic difference between a tort state and a no fault state is that drivers in a tort state retain the right to sue for damages. That doesn’t mean that law suits never happen in no fault states, but there are strict requirements in place about when a driver can sue another driver. If you are in a no fault state you will need to have personal injury protection or PIP coverage in place to pay for your own medical costs resulting from an accident. The no fault policy was enacted to help limit the amount of large settlements for pain and suffering or emotional damages.

The real impact is that each person that makes a claim for vehicle repairs in a no fault state does it with their own insurance policy. So, regardless of who is at fault in the accident, every one has to pay their own deductible and get their car fixed themselves. This has benefits and costs. When insurance companies can negotiate between themselves for financial responsibility, it is called subrogation. This can happen regardless of no-fault insurance. Customers typically see or participate in this process.

On the other hand some no-fault states don’t allow this process. That means your claim history is completely dependent on how many accidents you are involved in—regardless of whether you did anything wrong or not. Obviously, the end result can be your rates increase even if someone else is at fault and hits you. The key here it to ask your agent or insurance company which counts against your record (aka rates): are all claims or only claims resulting from at-fault accidents included in your record? Then you can be informed about managing your insurance claim history.

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Which states are no fault states?

As of January 2010 the following states are no fault states in regards to auto insurance: Florida, Hawaii, Kansas, Kentucky, Massachusetts, Mississippi, Minnesota, New Jersey, New York, North Dakota, Pennsylvania and Utah. If your state is not listed then it is currently a tort state. This impacts the type of car insurance coverage you will obtain mainly in terms of PIP coverage.

Whether or not you are in a tort or no fault state you will need to carry the minimum liability requirements of your state or, in a handful of states, prove your financial ability to pay for damages you cause. You need to carry PIP if you live in a no fault state where the ability to sue for damages is minimal. For this reason you want to ensure that your PIP coverage is adequate to meet your needs.

No fault auto insurance means that each driver’s car insurance must cover their medical needs in an accident. This limits the amount of law suits that can occur. Knowing whether you drive in a no fault state or a tort state will help when you select a car insurance policy.

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