No Fault Insurance

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What Is No Fault Insurance?

Currently, 12 states in the country require no fault insurance. This means that when a car accident occurs, no one has to be found at fault for causing it in order to determine who must pay the other party’s medical bills for bodily injuries. All the other 28 states operate on a tort system; this means that drivers are allowed to sue each other and someone does need to be found at fault. These states require that people purchase liability insurance to cover the expenses of third parties who have been hurt in the collision.

Personal Injury Protection Insurance

People who live in no fault states may still be required to purchase liability coverage, the type that will pay the expenses of the third party, but you will also be required to purchase no fault coverage also known as PIP insurance. Personal Injury Protection (PIP) insurance pays for the bodily injuries of:

  • The policyholder
  • The policyholder’s passengers
  • The policyholder’s family members who live in the same household
  • Drivers who have permission to operate the vehicle
  • The policyholder and the policyholder’s family members if they are riding in another person’s car and
  • In some cases, it pays for bodily injuries suffered after being hit by a car as a pedestrian

What PIP Insurance Covers

When the covered people listed above are riding in a vehicle and a car collision occurs, their medical bills will be paid with the policyholder’s PIP coverage. It doesn’t matter who was at fault because PIP insurance isn’t based on fault. You file a claim with your own insurance company and receive payment for your medical bills with your own PIP insurance.

If anyone needs to be taken to the hospital, PIP insurance pays the hospital bills. Anyone who passes away in the accident will have their funeral expenses paid for with the PIP insurance.

No Fault States

The following states are all no fault states: Florida, Hawaii, Kansas, Kentucky, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Pennsylvania and Utah.

Choice No Fault

Some states give you a choice on the type of insurance they will carry. You can choose to be a part of the no fault system or you can opt to participate in the tort system when you are purchasing your coverage. This means that you will either choose full tort or limited tort.

Full Tort: Full tort means that you will reserve your rights to sue the other party for non-economic losses if someone else is the cause of a car collision.

Limited Tort: You can also choose limited tort which means that you do want to be a part of the no fault system and you will be required to purchase PIP insurance. Your ability to sue a driver who has caused an accident will be limited. For example, you won’t be able to sue for damages for pain and suffering or emotional distress, but you may be able to sue in limited circumstances such as if you suffer a permanent physical injury or lose a body part.

Pennsylvania and New Jersey are states that allow their drivers to decide between full tort and limited tort.

How Much Does No Fault Cost?

A lot goes into determining how much auto insurance companies will charge their clients for their premiums. Your age, gender, occupation and zip code are just a few of the criteria that insurance companies use to determine auto insurance rates.

Each state does have an average for how much people are paying for their auto insurance premiums. For example, in Pennsylvania, the average price for car insurance is $1,353.56. In the state of New Jersey, people pay the much higher average price of $2,344.70. The national average for car insurance rates is $1,436.40.

No fault car insurance is something that must be purchased in no fault states and its advantage is that eliminates a lot of headaches due to lawsuits after people have been in car collisions.