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Insurance

What is No-Fault Insurance?

An auto insurance system where each driver's own insurance pays for their medical expenses and lost wages regardless of who caused the accident.

Understanding No-Fault Insurance

No-fault states limit lawsuits against at-fault drivers except in cases of serious injury exceeding certain thresholds. Personal Injury Protection (PIP) is the primary coverage in no-fault states. Currently, 12 states plus Puerto Rico use no-fault systems.

Examples

  • 1Michigan driver's PIP covering unlimited medical expenses
  • 2Florida driver filing claim with own insurer after accident
  • 3Meeting serious injury threshold to sue at-fault driver

Why This Matters in Legal Cases

No-fault insurance fundamentally changes how accident claims work. In no-fault states, your own insurance pays your medical bills and lost wages regardless of who caused the accident, which means faster access to benefits. However, the trade-off is that lawsuits against the at-fault driver are restricted unless the injury meets a "serious injury threshold," which varies by state.

Explaining to Clients

In no-fault states, help clients understand that their first step is filing a PIP (Personal Injury Protection) claim with their own insurer. Explain the serious injury threshold—clients can only sue the at-fault driver if their injuries exceed certain criteria (specific dollar amounts, permanent disfigurement, or loss of a body function, depending on the state).

Frequently Asked Questions

Which states have no-fault insurance?

Twelve states currently use no-fault systems: Florida, Hawaii, Kansas, Kentucky, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Pennsylvania, and Utah. Puerto Rico also uses no-fault. Kentucky, New Jersey, and Pennsylvania offer a "choice" system where drivers can elect no-fault or traditional tort coverage.

What is the serious injury threshold?

The serious injury threshold is the barrier you must meet to step outside the no-fault system and sue the at-fault driver for pain and suffering. It varies by state—some use a monetary threshold (medical bills exceeding a certain amount), while others use a verbal threshold (specific types of serious injuries like permanent disfigurement, significant limitation of use, or death).

Does no-fault insurance mean nobody is at fault?

No. Fault is still determined, especially for property damage claims and cases that exceed the serious injury threshold. "No-fault" simply means that for initial medical and wage loss benefits, each driver looks to their own insurance first rather than having to prove the other driver was at fault before receiving any compensation.

Sources

Related Terms

Uninsured Motorist Coverage

Insurance coverage that protects you if you're injured by a driver who has no liability insurance or insufficient coverage to pay for your damages.

Total Loss

When a vehicle is damaged to the extent that the cost of repairs exceeds the vehicle's actual cash value, or when the vehicle cannot be safely repaired.

Bad Faith Insurance

When an insurance company unreasonably denies, delays, or underpays a valid claim, or fails to properly investigate or defend its insured.

Subrogation

The right of an insurance company to pursue a third party who caused the loss to recover the amount paid on a claim.

Policy Limits

The maximum amount an insurance company will pay for a covered claim under an insurance policy.

Last updated: January 24, 2026
Reviewed by: Quilia Legal Content Team

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