Finding the right auto insurance can be tricky, and even more so when considering the lesser-known auto insurance system known as ‘no fault'. While most states have a ‘traditional tort' liability system for auto insurance, some have a no-fault system which you have to abide by instead. Here, I explain which states are governed by the no-fault law, what it involves, and how it differs from the more common traditional tort law.

Which states use the no-fault auto insurance system by law?

The following nine states are all no-fault:

  • Florida
  • Hawaii
  • Kansas
  • Michigan
  • Massachusetts
  • Minnesota
  • New York
  • North Dakota
  • Utah

The following states allow drivers to choose between the no-fault and traditional tort systems. These are known as ‘choice' states:

  • New Jersey
  • Kentucky
  • Pennsylvania

What does the no-fault system involve?

With the no-fault system, individuals are exempt from the liability of causing bodily injury (even if they do so) in a car accident - neither driver is deemed ‘at fault'. Each individual's own insurance provider pays for their minor injuries. The system was originally introduced in the states in the 1970s in a bid to lower premiums by avoiding lengthy litigation costs; a common outcome as the result of both drivers denying fault for the accident. The no-fault system limits the ability of individuals involved in a car accident to seek recovery from other drivers (or vehicle owners) also involved. Since its introduction in the 1970s many states have employed no-fault policies only to revert to the traditional tort system later, in many cases the hypothesized lower premium costs actually being higher.

If your state requires you to have no-fault auto insurance

If you live in one of the nine states where no-fault insurance is required, it is important to note that all state's no-fault laws differ slightly. Also, although no-fault law restricts the ability of individuals to sue other parties for damages, it by no means rules it out.

In the case of economic damages, i.e. accidents incurring costs from wage loss and medical expenses, most no-fault policies limit the injured party to only claiming for damages not covered by their own insurance policy. In the case of non-economic damages where pain and suffering is inflicted as a result of the accident, most no-fault policies allow injured parties to only seek compensation in the case of an exceptionally serious injury.

An exceptionally serious injury can be defined in either a monetary or verbal term. The monetary term sets a threshold with a specific dollar amount that must be spent on medical bills by the injured party before they can claim. The verbal term sets a verbal threshold that states which injuries are categorized as ‘serious' and justify a claim (i.e. permanent disability or death).

If you live in a choice state

If you live in one of the three choice or ‘option' states as mentioned above, it's important you consider the no-fault versus traditional tort approach seriously. Although the no-fault approach was partly invented to save policyholders money in terms of lower premiums, it could actually turn out to be more expensive. It's also worth noting that no-fault policies usually do not cover property damage, leaving you with a potentially large bill in case of an accident.

Making the right choice

A large factor in determining which auto insurance you decide upon is which state you live in, its minimum liability requirements help to majorly shape your policy. For help finding the best auto insurance for your personal situation simply choose your state in the box below to compare insurance rates and find the cheapest auto insurance in your area - we've already done the hard work for you!

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