There’s a lot of confusion in insurance about what No-Fault insurance is and how it works.
Most people confuse No-Fault insurance with Personal Injury Protection insurance. They’re rightly justified to do so. Why?
In many cases, No-Fault insurance comes from Personal Injury Protection insurance. But this is unknown to many.
So, we took an in-depth look at the definition of No-Fault insurance and presented it here in this article.
What is No-Fault Insurance?
No-Fault insurance helps cover you and your passengers’ medical expenses and loss of income after a covered accident. It does this regardless of who is at fault.
It can also cover funeral expenses in case of loss of life, depending on your policy.
Depending on your state, no-fault insurance is also referred to as Personal Injury Protection (PIP) insurance.
Often, insurers pay out a no-fault claim through the “personal injury protection” provisions.
What sets no-fault insurance apart from other types of car insurance is that it guarantees the policyholder coverage regardless of who is found at fault.
As long as your terms of policy cover the circumstances of the accident, no-fault or PIP coverage will pay for medical bills, income losses, and other related expenses. It also spells out that these compensations are for you and your passengers.
But like other insurance policies, no-fault insurance pays out the claim after calculating your insurance deductible and up to your policy’s coverage limit.
Is No-fault Insurance Optional?
The requirements for no-fault coverage vary from state to state. Besides, no-fault/PIP insurance isn’t available in all states.
This is why, in car insurance, states are classified into two:
- At-Fault States
- No-fault States
PIP coverage is mandatory, and drivers must include it in their policies in no-fault states. But, drivers can purchase PIP coverage as an add-on on top of traditional liability, comprehensive, or collision coverage in no-fault states.
No-Fault States
These are states with no-fault insurance laws. In these states, every driver must carry a PIP coverage in their car insurance policy.
In the event of a covered accident, the insurer will pay out the claim, regardless of who is found at fault for the accident.
No-fault insurance is a requirement in the following states:
- Florida
- Washington D.C.
- Kansas
- New York
- Pennsylvania
- Hawaii
- Kentucky
- Michigan
- Massachusetts
- Minnesota
- North Dakota
- Utah
The rest of the states that don’t require no-fault insurance are called at-fault states.
At-Fault States
All states that don’t require drivers to carry PIP insurance by law are at-fault states. This is where insurers will only pay out claims after establishing who was at fault for an accident.
At-fault states require the at-fault driver’s insurance company responsible for the accident to pay for injuries and medical bills, up to policy limits.
However, some at-fault states require drivers to carry PIP insurance. These are:
- Maryland
- Arkansas
- Delaware
- Oregon
Some states require PIP insurance as optional coverage. These are:
- Texas
- Virginia
- New Hampshire
- Wisconsin
- South Dakota
- Washington
Note: Since the majority of states in the U.S. don’t require or offer no-fault insurance, you need to make sure that you check and see what your state requires first.
What Does No-Fault Car Insurance Cover?
You already know that you can make an insurance claim, whether you’re at fault for the accident or not, as long as you have PIP coverage on your policy.
If you’re involved in an accident, no-fault insurance can cover the following for you and your passengers:
- Medical bills or costs that result from the accident. These may be medical and surgical treatment, ambulance and nursing services, dental and optometric treatment, medical supplies, and prosthetic devices.
- Health insurance deductibles. If your health insurance is subject to deductibles, the PIP will cover the deductibles.
- Lost wages (sometimes). This happens if your injury from the accident prevents you or your passengers from working.
- Essential services (sometimes). This can include grocery shopping, child care, or cleaning.
- Funeral expenses (sometimes). If the accident causes you or your passenger’s death, PIP can cover the funeral expenses.
Note: PIP insurance doesn’t cover every claim. For example, theft of your vehicle is covered under comprehensive insurance, while collision insurance covers property damage.
How Does No-Fault Insurance Work?
If you’re involved in an accident and have no-fault insurance in your policy, you can file a PIP claim for any losses mentioned above. But your claim must fall under covered accidents and meet the “serious injury” threshold.
This means, as a result of the car accident, you or your passenger is a victim of any of the following:
- Bone fracture
- Significant disfigurement
- A significant limitation of use of body system or function
- Permanent limitation of use of your body organ
- Substantially full disability for 90 days, or
- Death.
If your insurer covers your PIP claims, you’ll receive reimbursement up to your policy limit after the insurer deducts your insurance deductible.
Note that no-fault insurance only applies to car accident injuries or death. For any vehicle damage that results from the same car accident, you’ll file a claim against the at-fault driver’s comprehensive or collision insurance.
What If You’re In a State Without No-Fault Insurance?
All states have no-fault insurance laws.
So, if you get involved in a car accident in a state without no-fault insurance laws, and you need to file insurance claims, you have two options:
- Work with the driver who’s at fault and contact their insurance company to use their bodily injury liability insurance. This can help you cover the medical expenses, and you incur from the accident.
- If you’re at fault for the accident, file an insurance claim for medical payments coverage (if you have this included in your policy).
No-Fault Insurance and Health Insurance
Including a no-fault insurance coverage (PIP) in your policy is a good idea if it’s not a requirement in your state.
However, if you and the family members (those in your household) already have quality health insurance with post-accident benefits, you can opt for the lowest legally required PIP limits. This is to protect you from paying more on the insurance that offers similar coverages.
If you’d like to benefit from the additional protection that PIP provides, like lost wages, substitute services expenses, and funeral expenses, you can just increase your PIP limit. This will help you meet your specific needs.
But, if you and your family members (in your household) don’t already have health insurance with PIP benefits, you can get as much PIP coverage to the limit you can afford.
Don’t take chances. With PIP insurance, you can recover some of the money you used in your treatment and support from wages you lost during treatment.
Final Thoughts
No-fault/PIP gives you coverage on medical expenses, regardless of whether you’re at fault for an accident or not. But, it’s not available or a requirement in all states. Check with your insurance agent if your state requires PIP insurance before you purchase one.