No-fault insurance, also known as personal injury protection, or PIP, covers medical bills for you and your passengers if you're injured in a car accident, regardless of fault. Some states require it by law, while it's optional in others.

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How no-fault car insurance works

If you are involved in an accident in a no-fault state, your personal injury protection (PIP) coverage pays out on your initial medical bills and related costs, such as lost wages and funeral services. PIP can also help with tasks such as house cleaning if your injuries prevent you from doing so. If your medical expenses exceed your PIP limit, you can sue the other driver for compensation if state-specific conditions are met.

Many states adopted no-fault insurance laws in the 1970s to reduce costs related to settling car insurance claims. The intent was to save time and money by having insurers cover medical bills, versus filing a lawsuit.

If your or your passengers' injuries meet certain cost and severity criteria, it's possible to seek compensation for non-monetary damage such as pain and suffering. New York, for example, requires the injured party's medical costs to exceed $50,000 before they can sue the at-fault driver for damages. An at-fault driver can also be sued for non-monetary damages if they cause an accident resulting in death or dismemberment.

Which states have no-fault car insurance?

According to the American Property Casualty Insurance Association, 12 states and Puerto Rico require no-fault car insurance. They include:

  • Florida
  • Hawaii
  • Kansas
  • Kentucky
  • Massachusetts
  • Michigan
  • Minnesota
  • New Jersey
  • New York
  • North Dakota
  • Pennsylvania
  • Puerto Rico
  • Utah

All of these locales require drivers to carry PIP. They also restrict an injured party's right to sue the at-fault driver for compensation beyond PIP's limits.

Of the no-fault states, the following three states have "choice" no-fault car insurance laws. They allow drivers to choose between a standard PIP policy and a more expensive policy that does not restrict the right to sue. These states are:

  • Kentucky
  • New Jersey
  • Pennsylvania

There are 10 other states that require insurance companies to offer PIP, but do not restrict a driver's ability to sue for damages beyond their policy limits. Some of these states have mandatory no-fault insurance, but others consider it optional. These "add-on" states are:

Mandatory PIP

  • Arkansas
  • Delaware
  • Maryland
  • Oregon
  • Texas
  • New Hampshire

Optional PIP

  • New Hampshire
  • South Dakota
  • Virginia
  • Washington
  • Wisconsin

In the District of Columbia, drivers are given a choice between PIP coverage with restricted lawsuits and standard fault-based coverage. Drivers have 60 days after an accident to decide if they want to sue the at-fault party for expenses.

What other insurance is required in no-fault states?

Along with PIP, no-fault states typically require drivers to carry liability coverage for bodily injury and property damage. If an injured party can sue for monetary damages, the at-fault driver's liability coverage covers the costs.

Some no-fault states also require drivers to carry uninsured/underinsured motorist coverage. This activates if the at-fault driver in an accident has no or insufficient liability coverage to pay for your expenses.

While not required by any state, comprehensive and collision coverages are required by lenders if you finance your car. Collision coverage takes care of damage to your vehicle if you hit another car or object. Comprehensive coverage pays out on damages due to causes other than a collision. These include car theft, vandalism and fire. Comprehensive doesn't cover the theft of items from your car. Your homeowners or renters insurance takes care of that.

Do I need no-fault car insurance?

PIP or no-fault insurance is required in 12 states and Puerto Rico. However, even if you're not mandated by your state to have PIP, there are reasons to consider investing in it. They include:

Saves you money

Even if you carry health insurance, a long hospital stay or injury that requires extensive medical care can lead to expensive deductibles and copays. If you don't have health insurance, the out-of-pocket costs can lead to severe financial problems. PIP insurance can help protect your finances and peace of mind.

It keeps bills from stacking up

If you're in a car accident, taking care of medical expenses that result can be a problem you don't want to deal with. PIP takes care of your medical bills as they come in. Your car insurance company will work with the at-fault driver's insurance company and your health insurance company to recoup the costs.

Protects passengers

Even if you're able to cover your medical expenses after an accident, passengers in your car may not. PIP helps protect your family and friends driving with you.

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