The definition of no-fault varies from state to state that chooses to be a no-fault car insurance state instead of a tort state. Under a no-fault system, when you have an accident, your auto insurance provider automatically pays for your certain damages, regardless of fault, up to a specified limit.
There are currently 12 states with no-fault auto insurance laws in effect. These states are:
- New Jersey
- New York
- North Dakota
In exchange for this guaranteed payment of no-fault insurance, you must forego some of your rights to sue the other driver involved in the accident. This means you are also protected from being sued in the event you are at fault in an accident.
The type of no-fault insurance required in each state differs. In many states, such as Florida, no-fault basically means you are required to have Personal Injury Protection (PIP), which you use if injured in an accident, no matter who was at fault. So if you were not at fault in an accident, you would place a claim against your own personal injury protection coverage instead of the at-fault party's Bodily Injury Liability. However in the same scenario, damage to your car would still go through the at-fault party's Property Damage Liability coverages.
In Pennsylvania, New Jersey and Kentucky, motorists are allowed to choose between traditional tort and no-fault coverage. These states thus may be referred to as optional or "choice no-fault states." Auto insurance policyholders need to choose between full tort and limited tort (no-fault) options when obtaining their coverage.
Michigan has one of the most comprehensive no-fault auto insurance systems in the United States. There are three basic parts to a Michigan no-fault policy that must be purchased and carried on every vehicle. This basic coverage is referred to by many as public liability and property damage, or PLPD. The 3 parts to the Michigan no-fault policy are: Personal Injury Protection (PIP), Property Protection (PPI) and Residual Bodily Injury and Property Damage Liability (BI/PD). PPI pays up to $1 million for damage you cause to other people's property, such as buildings and fences, but not to other cars unless they were legally parked when you hit them. A basic no-fault policy in Michigan does not pay to repair or replace another car or your own car if it is damaged. Therefore, if you want to have your vehicle covered if it is damaged (by you or another driver) or stolen, you must purchase physical damage coverage of collision and comprehensive.
Certain states have embraced the no-fault system to try and curtail lawsuits. This is done in most no-fault states; your right to sue is prevented or extremely limited unless there are serious injuries or death resulting from the accident. Non-economic damages, such as pain and suffering, can be sought by injured parties in most no-fault systems, but only in cases where serious injuries have occurred.