No-fault auto insurance is also known as personal injury protection (PIP) and is a requirement for drivers in several states. This type of insurance is designed to cover medical expenses in the event that you or your passengers are injured in a car accident, regardless of whether or not they were responsible for causing the crash.
What is no-fault insurance?
With no-fault insurance (sometimes called personal injury protection, or PIP), you and your passengers' medical and hospital bills are covered up to your policy limits, less any applicable deductible. It may also include coverage for lost wages, burial and funeral costs, and more, depending on the insurer and the state you live in.
No-fault insurance does not compensate you if your vehicle is stolen or vandalized, nor does it cover damage to your car or the personal property of others in the event of a collision. However, it limits your ability to sue for damages in most cases.
Personal injury protection or no-fault coverage is mandatory in a dozen states and optional in several others. Minimum coverage amounts vary by state, but range from less than $5,000 to $50,000, and you may be able to increase that amount up to a certain limit.
How does no-fault insurance work?
Let's say your car collides with another vehicle and you and the other driver receive minor injuries. In a state where no-fault insurance is required, you would file a claim with your own insurer to receive compensation for your medical expenses. The other driver would have to do the same with his insurance company. It doesn't matter who may have been responsible for the accident, because with no-fault insurance there is no need to file a claim against the other person's insurance.
Coverage levels for Personal Injury Protection (PIP) vary from state to state. In Kansas, one of 12 "no-fault" states where such insurance is required, the minimum amount of coverage required is $4,500. Compare that to Michigan, another "no-fault" state. Drivers in that state must have a minimum coverage of $50,000.
If you or your passengers are seriously injured in a crash and you want to sue the other driver in court for damages, certain rules apply. Your medical expenses must exceed a certain dollar limit (this is called a dollar limit) or meet a certain degree of severity, such as being disabled, disfigured, or dead (this is called a verbal limit). This varies between states. Hawaii, Kansas, Kentucky, Massachusetts, Minnesota, North Dakota, and Utah use a monetary threshold. The other five no-fault states use a verbal threshold, according to the Insurance Information Institute (III).
What does no-fault insurance cover?
Details vary between insurers and policies, but no-fault insurance coverage can include: