Key Takeaways
- No-fault insurance requires your OWN insurer to pay your injury expenses, regardless of who caused the accident
- Personal Injury Protection (PIP) is the no-fault coverage — it typically covers medical expenses, lost wages, and essential services
- There are 12 true no-fault states plus 9 'choice' or 'add-on' states with PIP options
- No-fault laws restrict the right to sue — you can only sue for serious injuries that exceed a threshold (verbal or monetary)
- PIP limits vary widely by state — from $2,500 in New Jersey to unlimited in Michigan (pre-reform)
No-Fault Insurance and PIP
No-fault auto insurance is a system where your own insurer pays for your injuries regardless of who caused the accident. This differs from the traditional "tort" system where the at-fault driver's insurance pays.
What Is No-Fault Insurance?
Definition: A system where each driver's own insurance pays for their injuries, regardless of fault.
Key Features
| Feature | Description |
|---|---|
| Your insurer pays | Regardless of who caused the accident |
| Faster payment | No need to determine fault first |
| Limited lawsuits | Tort restrictions apply |
| Required coverage | PIP is mandatory in no-fault states |
Personal Injury Protection (PIP)
PIP is the coverage that makes no-fault systems work.
What PIP Typically Covers
| Coverage | Description |
|---|---|
| Medical expenses | Hospital, doctors, rehab |
| Lost wages | Income lost due to injury |
| Essential services | Housekeeping, childcare |
| Funeral expenses | Death benefit |
| Survivor benefits | Death benefits to family |
PIP vs. Medical Payments
| Feature | PIP | Medical Payments (Part B) |
|---|---|---|
| Mandatory in | No-fault states | Optional everywhere |
| Lost wages | YES | NO |
| Essential services | YES | NO |
| Funeral expenses | Often YES | Sometimes |
| Typical limits | $10,000-$250,000+ | $1,000-$10,000 |
No-Fault States
True No-Fault States (12)
| State | Required PIP Limit | Threshold Type |
|---|---|---|
| Florida | $10,000 | Monetary |
| Michigan | (Reformed 2020) | Verbal |
| New Jersey | $15,000 | Verbal/Monetary |
| New York | $50,000 | Verbal |
| Pennsylvania | $5,000 | Choice |
| Massachusetts | $8,000 | Monetary |
| Hawaii | $10,000 | Monetary |
| Kansas | $4,500 | Monetary |
| Kentucky | $10,000 | Choice |
| Minnesota | $40,000 | Monetary |
| North Dakota | $30,000 | Monetary |
| Utah | $3,000 | Monetary |
Choice/Add-On States (9)
In these states, PIP is available but drivers can choose to opt out:
- Arkansas
- Delaware
- Maryland
- Oregon
- South Dakota
- Texas
- Virginia
- Washington
- Wisconsin
Tort Thresholds
In no-fault states, you can only sue the at-fault driver if injuries exceed a threshold.
Verbal Threshold
Definition: You can sue only if injuries meet specific criteria (e.g., "serious injury").
Serious Injury Typically Includes:
- Death
- Significant disfigurement
- Bone fracture
- Permanent injury
- Loss of body function
- Loss of fetus
Monetary Threshold
Definition: You can sue only if medical bills exceed a specific dollar amount.
Example: $2,500 threshold
- Medical bills under $2,500: Cannot sue
- Medical bills over $2,500: Can sue for pain and suffering
Threshold Comparison
| Type | Pros | Cons |
|---|---|---|
| Verbal | Limits minor lawsuits | Subjective interpretation |
| Monetary | Clear, objective | May encourage inflated bills |
How No-Fault Claims Work
Step-by-Step Process
- Accident occurs
- Report to YOUR insurer (not the other driver's)
- Submit medical bills to PIP
- PIP pays regardless of fault
- If serious injury: May pursue lawsuit against at-fault driver
Example Claim
Scenario: You're rear-ended. Medical bills: $8,000. Lost wages: $3,000.
| In Tort State | In No-Fault State |
|---|---|
| Wait for fault determination | File PIP claim immediately |
| At-fault driver's insurer pays | Your PIP pays $11,000 |
| May take months | Payment within days/weeks |
Pros and Cons of No-Fault
Advantages
| Benefit | Explanation |
|---|---|
| Faster payment | No fault determination needed |
| Reduced litigation | Fewer lawsuits |
| Guaranteed coverage | Your own insurer pays |
| Lower legal costs | Less attorney involvement |
Disadvantages
| Drawback | Explanation |
|---|---|
| Limited lawsuit rights | Can't sue for minor injuries |
| Higher premiums | PIP coverage costs more |
| No pain/suffering | For minor injuries |
| Fraud potential | Some abuse the system |
Subrogation in No-Fault
Even in no-fault states, insurers may seek reimbursement:
- Your PIP pays your medical bills
- Insurer may seek subrogation against at-fault driver
- At-fault driver's liability pays back your insurer
State-Specific Notes
Michigan (Pre-2020)
- Only state with unlimited PIP
- Very high premiums
- Reformed in 2020 to allow coverage choices
Florida
- $10,000 PIP mandatory
- No bodily injury liability required
- High uninsured motorist rate
In a no-fault state, whose insurance pays for your injuries after an auto accident?
PIP coverage typically includes all of the following EXCEPT:
A "verbal threshold" in no-fault insurance means:
6.1 Liability Insurance Basics
Chapter 6: Liability Insurance Concepts