Auto Insurance Coverage in No-Fault States: The Basics

If you live in one of the 12 states that currently has or includes a no-fault auto insurance scheme, i.e., Florida, Michigan, New Jersey, New York, Pennsylvania, Hawaii, Kansas, Kentucky, Massachusetts, Minnesota, North Dakota and Utah, or the District of Columbia, this article will help you dissect and understand the coverages on your auto policy.  All the other states are considered “fault states”.   In a no-fault state, it does not matter who caused the accident in order for you to recover money under an insurance policy.  The good news is that your own insurance will protect you and provide you with immediate medical treatment.  The not-so-good news is that in a no-fault state, you are limited in your ability to sue the negligent driver for damages.

There are currently nine states that are considered “No-Fault” and three additional states which are “Choice” states, where you are given the option of purchasing a no-fault policy or a “tort policy”. The tort policy is the same type of fault-based policy as in the majority of states. If you have a tort policy in a choice state, the claims procedures are the same as if you are in a fault state and you retain your right to sue the negligent party with few limitations. In general, tort policies have higher premiums.

Bodily Injury (BI) and Property Damage (PD) Liability—Suing the other driver
Under a pure no-fault system, your own auto insurance policy would pay for any economic damages you incur, including medical bills and lost wages, up to your policy limits. You would be prohibited from suing a negligent driver for general damages such as pain and suffering, loss of companionship, etc. Currently, there are no pure no-fault states.

All of the no-fault states have somewhat of a modified system where your insurer pays for your economic damages up to the policy limits, but you may be allowed to sue for non-economic or general damages if those damages exceed a certain amount.  In some states that amount is $250,000; in others it is higher, and in still others, you or your family may sue only if the injuries are “serious” or resulted in death, regardless of the dollar amount. This would fall under the BI coverage of your policy.

No-fault does not usually apply to property damage. Even in a no-fault state, therefore, you may either go through your own insurance or the other driver’s insurance if the other driver is at fault. Only Michigan requires a PPI policy—Property Protection Insurance—which pays for damage to your vehicle no matter who was at fault. It is similar to Collision (which covers your own car), but with PPI you pay no deductible. Except for Michigan, in the no-fault and choice states the PD coverage on your policy is basically the same as for a fault-based policy. 

Personal Injury Protection (PIP)
The Personal Injury Protection (PIP) section of your policy covers you for bodily injuries caused by the negligence of another driver. Although different states cover different expenses, in general, PIP covers your medical bills, lost wages, funeral costs and death benefits up to your policy limits. Most of the states have a minimum of $10,000 coverage for PIP, which can be increased for a higher premium. In some states you can decrease your premium by applying a deductible.

Complex Coverage
No-fault insurance coverage can be very complex and you may want to consult a personal injury lawyer to help you through the process if you are injured in an accident. Here is an example of how complicated it is in Massachusetts, for example. There, every driver must carry PIP coverage with a minimum of $8,000 per person, which covers the following benefits:

• Medical expenses (including eye glasses, prosthetic devices, funeral services and professional nursing);
• Seventy five (75%) percent of lost wages or lost earning power if unemployed; and,
• Payment for necessary services provided to the household, which the injured party would have performed without pay (i.e. cleaning, etc.).

Massachusetts PIP coverage will only pay the first $2,000 of your medical bills, but will cover up to a total of $8,000, if you have no other health insurance and the expenses were incurred within two (2) years of the date of the accident. 

In Massachusetts, you may sue the negligent driver for general damages only when:
Your reasonable and necessary medical bills exceed $2,000, or

• There is permanent or serious disfigurement, or
• There is a fracture, or
• There is a partial or complete loss of a body part, or
• There is loss of sight or hearing, or
• There is a fatality

All of the other no-fault and choice states are variations on this theme, but with some major differences in limits and rules for filing suit. Check with your insurance agent, your insurance company, your state’s Department of Insurance, or a personal injury attorney if you have any questions about your state’s rules, individual coverages or your right to sue.