Q:
I'm moving to a state with "no-fault" auto insurance—what exactly does this mean?
Answer:
The shortest explanation in broad and simple terms is that it means your car insurance company will pay you for your injuries or damaged property resulting from a car accident, regardless of who caused the accident. In that sense, "no-fault" insurance is different from "at-fault" insurance, in which the car insurance companies pay based on a decision about who caused the accident.
A more formal explanation is that most states have what is called a "traditional tort liability system," otherwise known as an at-fault system, for auto insurance. Under this system, fault is determined by the legal principles of "provable negligence." Thus, if you cause a car accident, you are legally responsible (liable) for the damages, hence the term "liability insurance."
In 12 states (FL, MI, NJ, NY, PA HI, KS, KY, MA, MN, ND and UT), people are either required or allowed to use a no-fault system. Under this system, in addition to payment irrespective of the determination of fault, the law places limits on the ability of people who are hurt in a car accident to seek monetary recovery from the owners or operators of other cars involved in an accident. For medical payments and lost wages, many no-fault systems only allow the person incurring those expenses to sue for damages that are not covered by their own insurance. For pain and suffering, most no-fault systems only allow the injured person to sue if they suffered "serious" injury.
Kentucky, New Jersey, and Pennsylvania have "choice" no-fault laws; people can choose between at-fault and no-fault systems when their policy is written or renewed; once the choice is made, it can't be changed unless the policy is rewritten. In both Kentucky and New Jersey, people are assigned the no-fault option unless they specify otherwise. In Pennsylvania, however, the at-fault option is the default.
The idea behind no-fault insurance is that it can lower premium costs by reducing lawsuits regarding the cause of an accident, and at the same time provide quick payments for injuries.