The No-Fault System
If you live in a no-fault state, this section applies to you. Each state must implement
either a tort system or a no-fault system. The system your state has implemented
will determine what kind of insurance is available to you.
There are many variations on the no-fault system that make it difficult to provide
accurate information on a national basis. This booklet provides a basic overview
of no-fault, but for specific questions about your state's no-fault law contact
your state insurance department.
In a no-fault state individuals need not go through the court system to have their
financial loss paid if the loss results from an injury. Two individuals who have
a traffic accident may file claims with their own insurance company. Each insurance
company pays the claim for the personal injury to their policyholder regardless
First of all, under a no-fault system your insurance company pays you directly for
your losses as a result of injuries sustained in an accident, regardless of who
is at fault. Similarly, the other driver collects losses for his or her injuries
from his or her insurance company. Under a no-fault law there is no need to determine
who is at fault to receive payment for injury claims.
No-fault does not completely eliminate the risk of your being sued. However, no-fault
laws do place restrictions on when a suit can be brought. This means that you can
be sued but only under specific conditions. Since no-fault laws do not completely
eliminate a person's right to sue, the possibility of your being sued is very real,
especially in the event that you are the driver at fault in an accident that causes
serious injury to others.
Personal Injury Protection
The most basic no-fault benefit is personal injury protection coverage (PIP). This
coverage will pay you, your relative or any other person riding in your car a minimum
benefit amount per person for injury regardless of fault. The level of benefits
varies widely among states.
The following are types of coverage's that may be extended to you under typical
personal injury protection coverage:
- Medical Expense Benefits. This benefit includes all reasonable charges for medical,
hospital, surgical, professional nursing, dental, optometric, ambulance, prosthetic
services and X-rays.
- Rehabilitation Expenses Benefit. This benefit includes charges for psychiatric,
physical and occupational therapy, and rehabilitation.
- Work Loss Benefit. This benefit includes coverage for loss of wages up to a specific
limit for a specific time period following injury.
- Funeral Expense Benefit. This benefit covers all reasonable charges up to a specific
amount for funeral services including burial and cremation expenses.
- Survivors Loss Benefit. This benefit provides a payment to your surviving spouse
or dependents up to a specific amount for a specific time period.
Residual Bodily Injury Liability Coverage
Under no-fault policies, most injury claims are covered under your PIP benefits.
If there is a situation where those benefits are not enough and there is a possibility
of your being sued, many states include residual bodily injury liability coverage.
This coverage will protect your family and anyone else while in your car with your
permission in the event you are sued because of injuries caused to others.
What are the situations under which you can be sued? Again, no-fault laws will vary
greatly from state to state, but each no-fault state has defined certain thresholds
that if exceeded, open the possibility of a suit. These thresholds can be based
on specific dollar amounts, clearly defined injuries and/or a death resulting from
What No-Fault Doesn't Cover
In most states, the no-fault law specifically excludes property damage liability
for damage that you cause to the property of others. If you are at fault in such
an accident, you will be held liable and can be sued for these losses.
Only in a limited number of states does the no-fault law extend some coverage to
damage you may cause another driver's automobile. Furthermore, even in these limited
cases, property damage liability coverage does not extend to your car. You must
buy a separate collision coverage to take care of this risk.
Once again, you should be aware that this booklet can only give you a general overview
of no-fault laws governing insurance. For specific information about the no-fault
law and insurance in your state, contact your state insurance department. Most state
insurance departments have written consumer information that will outline the specific
limits and responsibilities for auto insurance in their state.