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Understanding No-Fault Auto Insurance

A no-fault auto insurance system requires drivers to have minimum insurance in the event the driver is injured. The insurer automatically pays for the driver’s damages, regardless of who is at fault for the accident, which theoretically keeps insurance costs down and makes it easier to process claims. Currently, no-fault insurance is required in Colorado, Florida, Hawaii, Kansas, Kentucky, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Pennsylvania, and Utah.
 
Usually no-fault insurance coverage (also called "personal injury protection" or "PIP”) is relatively limited, paying only for the driver’s medical bills and lost income up to the limits of the driver’s policy. Pain and suffering, as well as medical bills over the policy limits, will not be covered.
 
If the driver’s medical bills and lost wages are greater than the policy limits of his or her insurance, the driver may be able to collect from the driver at fault by suing directly, under certain circumstances. The rules on whether an injured driver can sue the driver at fault for damages not covered by no-fault insurance vary from state to state.
 
In some states, lawsuits against drivers at fault after no-fault insurance has been exhausted are limited to "serious" injuries or death. "Serious" means something different in each state but generally includes broken bones, severed limbs, internal injuries requiring hospitalization, and so forth. Some states only allow a lawsuit against the driver at fault for damages not covered by no-fault insurance if the injured driver’s total medical bills are over a specific amount (which varies by state).
 
In Pennsylvania and New Jersey, a hybrid no fault system known as "choice no fault" exists. In these states, a driver may choose to be insured under a strict no-fault plan, in which case the driver will be unable to sue an at-fault driver and also cannot be sued if at fault. A driver may also choose not to take out no-fault insurance and be permitted to sue other drivers. Of course, then the insured may also be sued if he or she is at fault for an accident.