No-fault insurance is a term that describes the auto insurance system in states where an insured driver's policy pays for injuries that occur in an accident, no matter who was at fault in the accident. If you live in a no-fault state and do not purchase coverage to protect yourself, your medical expenses will not be covered if another person causes the accident. Their insurance only protects them – not you.
The coverage that is purchased in a no-fault state is called Personal Injury Protection, or PIP. The amount and type of PIP coverage varies considerably by state. In general, a policyholder in a no-fault state would be reimbursed for medical expenses, loss of wages and other injury-related expenses, and they are usually not allowed to sue for additional money from the person who caused the incident. Other insured drivers who are injured while in your car may be covered by their own policy or by your policy, depending on state laws.
Twenty-four states, including the District of Columbia, have laws that allow policyholders to obtain payment for auto accidents from their own insurers. Of these, the 12 states listed below are considered true "no-fault states" because the insurance laws limit when policyholders may sue the person who caused the accident. The guidelines for suing are either based on a "monetary threshold" which means that the expenses exceed a certain dollar amount or a "verbal threshold" which permits a lawsuit when the injuries result in death, permanent disability or disfigurement. Additionally, some states allow drivers to seek payment for "non-economic losses" such as pain and suffering. States that are considered true no-fault states include Hawaii, Florida, Kansas, Kentucky, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Pennsylvania, and Utah.
While no-fault insurance limits the right of an injured driver to sue, at-fault drivers may be responsible for expenses over the limit of the injured person's Personal Injury Protection coverage. For example, in Minnesota, drivers are required to purchase bodily injury and property damage liability coverage to cover the costs that exceed the amount of PIP coverage an injured may have.
In New Jersey and Pennsylvania, drivers may choose to purchase Personal Injury Protection coverage or Bodily Injury Liability coverage, which pays for injuries based on who is at fault for the accident. In Kentucky, when drivers buy PIP coverage, they may also "buy back" the right to sue another driver, by paying more for bodily injury liability coverage. With the increase in the number of uninsured drivers on the road, especially in urban areas, buying Personal Injury Protection often provides a better value because you have the assurance that you will have coverage for your own expenses.
No-fault laws only apply to personal injury. Damage to your car or to other personal property is not covered by no-fault insurance, so it's important to protect the value of your car by purchasing Comprehensive and Collision coverage. And, purchasing property damage liability coverage will pay for damage you cause to someone else's property in an auto accident, if you are held responsible for the repairs.
Mandatory coverages vary by state. Your agent or insurance company representative will explain how each coverage works and the choices you have for protecting yourself and your family.
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