Is no-fault insurance optional? Do you need to buy no-fault insurance if you live in a no-fault state?
In certain states, drivers can choose whether to participate in the fault or no-fault insurance system. In other states, drivers must buy no-fault car insurance.
Today, we’re highlighting which states are considered no-fault states, which states are considered at-fault states, and which states are considered ‘choice no-fault’ states.
No-Fault Versus At-Fault Car Insurance
There are pros and cons to both at-fault and no-fault car insurance systems. Many states switched to no-fault car insurance systems in the 1970s and 1980s due to rising insurance fraud and insurance costs. Today, many of these states are considering switching back to at-fault systems due to these same concerns.
Key differences between the two car insurance systems include:
- No-fault insurance covers your medical costs regardless of who is at fault for the car accident
- With no-fault car insurance, you can receive compensation from your car insurance company immediately instead of waiting for the insurance companies to determine fault
- With at-fault car insurance, investigators at either insurance company may negotiate for months to determine which driver was at-fault, or which driver was more at-fault, delaying payout even further
Most states use tort liability insurance systems, where fault needs to be determined after every accident. 12 states, however, have adopted no-fault insurance systems where your insurance company will pay after every accident, regardless of fault.
No-fault states include:
- New Jersey
- New York
- North Dakota
Puerto Rico also uses a no-fault insurance system.
No-fault insurance requirements can vary widely between the above states. Some states require personal injury protection (PIP), property protection (PPI), and additional insurance policies, for example. Several of the above states – including Michigan and Florida – also have notoriously high insurance costs compared to other states.
Tort Liability States
All other states not listed above are considered tort liability states – or ‘at-fault’ states. In these states, fault must be determined after each accident – even if the fault turns out to be 50/50 between both drivers.
Some of the states listed below are also considered choice no-fault states, which means drivers have the choice to participate in the no-fault or at-fault insurance system. Other states are considered add-on states because drivers can add no-fault-style insurance policies like personal injury protection (PIP), which pays out after every accident regardless of fault.
States that use tort liability car insurance systems include:
- New Hampshire
- New Mexico
- North Carolina
- Rhode Island
- South Carolina
- South Dakota
- West Virginia
Choice No-Fault States
In choice no-fault states, drivers can choose a no-fault car insurance policy or a traditional tort liability insurance policy. This hybrid system is rare. It’s only found in three states, including:
- New Jersey
New Jersey and Pennsylvania have a verbal threshold for no-fault insurance claims, while Kentucky has a monetary threshold.
Finally, some states are considered ‘add-on’ states. In these states, drivers can carry a personal injury protection (PIP) car insurance policy and get covered by their own insurance company even if the other driver is at-fault.
You might want to add PIP car insurance to your policy if you want guaranteed medical coverage immediately after an accident while fault is still being determined.
With some car accidents, for example, drivers may wait months for payment because insurance companies are negotiating over which person is more at-fault.
In the following add-on states, drivers can add no-fault-style car insurance coverage to their policy, but they’re never required to do so:
- Washington DC
- New Hampshire
Is No-Fault Insurance Optional?
No-fault car insurance is not required in most states in America. 12 states, however, require you to have no-fault car insurance, and 4 additional states require you to have personal injury protection (PIP) coverage.
States Where No-Fault Insurance is Mandatory
If you live in the twelve no-fault states listed above, then no-fault insurance is not optional. Drivers in Florida, Hawaii, Kansas, Kentucky, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Pennsylvania, and Utah are all required to have no-fault insurance to legally drive on the road.
States Where PIP Insurance is Mandatory
Certain states use no-fault systems, but still require drivers to maintain PIP coverage.
Drivers in Arkansas, Delaware, Maryland, and Oregon are required to have personal injury protection (PIP coverage).
States Where No-Fault Insurance is Optional
No-fault car insurance is optional in certain other states, including New Hampshire, South Dakota, Texas, Virginia, Washington, Wisconsin, and Washington DC. Drivers can choose to participate in the no-fault car insurance system or not.
In all other states, no-fault insurance is optional.