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What Is No-fault Insurance and What Does it Cover?

Updated: November 2015

No-fault insurance is a type of car insurance in which an insurance provider covers damages incurred to its customer in an accident, regardless of who's at fault. Essentially, this eliminates the need for a driver to go after another party's insurance company in order to be reimbursed for damages that the other person caused. No-fault car insurance is currently in place in 12 states and the Commonwealth of Puerto Rico.

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What Is No-Fault Insurance and What Does it Cover?

The 12 states that currently have no-fault insurance laws are Florida, Hawaii, Kansas, Kentucky, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Pennsylvania and Utah. Three of those states—Kentucky, New Jersey and Pennsylvania—give residents the choice of picking no-fault insurance or opting out in favor of "full tort" coverage, which is available in just about every other state. Full tort coverage means that there's no limit to the amount of money that a person can sue for in civil court. But, for insurance customers in the states of Florida, Hawaii, Kansas, Massachusetts, Michigan, Minnesota, New York, North Dakota and Utah, opting out of no-fault coverage isn't even an alternative.

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What Falls Under No-Fault?

One of the most frequently asked questions about no-fault car insurance is, what exactly does it cover?

Bodily injury. Traditional car insurance policies let you take out liability coverage to pay for bodily injury claims from anyone injured in an accident in which you have been deemed at fault. With no-fault car insurance, the bodily injury coverage provided by your policy extends to you. One of the benefits of having no-fault coverage is that medical claims are paid quickly and you don't have to wait for a lawsuit before you are reimbursed for money you would otherwise have to pay out of pocket for your medical expenses.

Associated medical bills and other losses. The Personal Injury Protection element of no-fault car insurance ensures not only that your hospital bills are paid, but that you're also covered for any associated losses. For example, if you're injured and unable to return to work for some time, your no-fault coverage may help foot the bill for lost wages. This isn't always a guarantee, and availability varies by state.

What Does No-Fault Insurance Not Cover? The term "no-fault" usually pertains only to coverage relating to personal injury, and does not include coverage for property damage. In states that require consumers to have a no-fault car insurance policy, as in states without no-fault insurance, the liability coverage in your auto insurance policy covers you for damages to another person's car, and you can purchase collision coverage for your own vehicle.

Determining whether no-fault insurance is right for you is, for most consumers, a non-issue. You're either required to have it, or you don't have access to it. Only customers in three states have the option to choose between full tort coverage and no-fault coverage. If you live in Kentucky, New Jersey or Pennsylvania and you're unsure if opting out of no-fault is the right decision, get on the phone with a qualified insurance agent to discuss your options.

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