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Coverage and Claims

What is No-Fault Insurance?

You may sometimes come across this term when comparison shopping for auto insurance. Here's an explanation of what "no-fault insurance" really means.

In most states, auto insurance functions under a traditional fault-based system. Under this system, insurance companies make payments based on each person's degree of fault in an accident. However, long and costly court battles may be required to determine who was at fault in many accidents. In an attempt to reduce this problem, thirteen states (CO, FL, HI, KS, KY, MA, MI, MN, NJ, NY, ND, PA, and UT) have adopted an alternative no-fault system of insurance.

Under a no-fault system, when you have an accident, your auto insurance provider automatically pays for your damages (regardless of fault) up to a specified limit. In exchange for this guaranteed payment, you must forego some of your rights to sue the other driver involved in the accident. You are also protected from being sued in the event you are at fault in an accident. There are elements of no-fault in all auto insurance coverage. For example, medical payments and property damage are typically paid regardless of fault.

Under a pure no-fault system, your auto insurance provider pays for any economic damages (such as medical bills, lost wages, etc.) up to the policy limit, and you are completely prohibited from suing a negligent driver for "non-economic" damages (such as pain and suffering, loss of companionship, etc.).

At the present time, no states function under a pure no-fault system. The thirteen no-fault states have adopted a modified no-fault system. This means that your insurer still pays for your economic damages up to the policy limit, but you may be allowed to sue for non-economic damages if the amount of these damages exceeds a specified threshold.

Please note that this description/explanation is intended only as a guideline.