If you’ve tried applying for a car insurance coverage or had found interest in insurance policies, there’s a big chance you’ve already encountered the phrase, “no-fault states”.
But, what exactly does it mean? Below is a brief guide on what “no-fault” insurance means, and which states in the U.S. are no-fault states.
Read on to know the basics of this mandate and prevent possible insurance-related problems from emerging. Check out our discussion below!
What Exactly Is a No-Fault State?
In America, all drivers share one common denominator: they all have automobile insurance, as required by the law. Normally, in most U.S. states, when drivers get into an accident, the common rule is that the one who is to blame for the accident bears the liability.
Specifically, they are compelled to take on the responsibility of paying the damages and injuries caused by the crash. And, usually, they carry out this responsibility through their insurance carrier.
However, that is not the case in all states. In fact, these states are what we call, “no-fault states". As the name suggests, within these states, it does not matter who is at fault for the accident.
Instead, all parties are required to rely on their own insurers to take care of their own bills and other costs incurred in the accident. This includes medical bills, wage loss, replacement services claims, and more.
How No-Fault Insurance Works
In other words, insurers will compensate for the cost of minor injuries sustained by their own policyholders, regardless of who is at-fault for the accident.
Within no-fault states, anyone cannot simply file a liability claim (or personal injury lawsuit) against the other party. To do so, they must meet strict conditions – known as threshold conditions – which relate to the severity of the injury the person incurred due to the car accident.
As explained by the Insurance Information Institute, these thresholds “may be expressed in verbal terms (a descriptive or verbal threshold) or in dollar amounts of medical bills, a monetary threshold".
What Are the No-Fault States in the U.S.?
To date, there are only 12 no-fault states in the U.S. These are Florida, Michigan, New Jersey, New York, Pennsylvania, Hawaii, Kentucky, Massachusetts, Minnesota, North Dakota, and Utah, as well as Puerto Rico.
Generally, coverage and specifics of the no-fault auto insurance are determined at the state level. In no-fault states, drivers are required to have personal injury protection (PIP) coverage (also called “no-fault” insurance).
Each state will determine the minimum PIP coverage required for motorists, which they can use to pay for a certain amount of medical bills in the event of an auto accident.
Thresholds for Certain States
In Florida, Michigan, New Jersey, New York, and Pennsylvania, all states follow verbal thresholds. Whereas, Hawaii, Kansas, Kentucky, Massachusetts, Minnesota, North Dakota, and Utah have a monetary threshold.
New Jersey, Pennsylvania, and Kentucky, on the other hand, follow what we call a “choice no-fault” law. This means motorists living in the state can choose between a no-fault auto insurance policy or the more traditional tort policy when they apply for an auto insurance policy.
The Bottom Line
Impressed about what you’ve learned regarding “no-fault” insurance? Have you been to any of the mentioned no-fault states in the U.S. before?
Before you go and shop for an auto insurance coverage, be sure to contact a trusted insurance agent first!
