How Does No-Fault Auto Insurance Work?

Last Updated on December 27, 2025

No-fault auto insurance can be confusing because it doesn’t mean “nobody is at fault.” It means that injury-related costs are typically paid by your own insurer first (through Personal Injury Protection, or PIP) after a crash—no matter who caused it.

In this guide, we’ll break down what no-fault insurance really is, which states use a no-fault system, what PIP covers (and doesn’t), and when you can still pursue the other driver for additional compensation.

Key Takeaways

• No-fault auto insurance generally means injury claims are paid by your own insurer first through Personal Injury Protection (PIP), regardless of who caused the crash.
• “No-fault” usually applies to bodily injury benefits—not vehicle repairs—so collision coverage or the at-fault driver’s property damage liability typically handles car damage.
• Most no-fault states restrict lawsuits for pain and suffering unless injuries meet a state-defined threshold (serious injury/verbal threshold or monetary threshold).
• There are 12 commonly recognized no-fault states (plus Puerto Rico), and rules can vary widely—so always confirm your state’s PIP requirements and limits.

What Is No-Fault Auto Insurance?

No-fault auto insurance is a system where drivers generally turn to their own policy for certain injury-related expenses after an accident. The key coverage is usually personal injury protection (PIP), which can help pay medical bills and other losses for you (and often your passengers) regardless of fault.

No-fault rules mainly apply to bodily injury claims (medical bills, lost wages, etc.). Property damage and vehicle repairs are handled differently (more on that below).

No-Fault vs. Tort: What’s the Difference?

No-fault insurance is often contrasted with a traditional tort insurance system (also called an “at-fault” system). In an at-fault state, the driver who caused the crash is generally responsible for the other person’s injury and damage losses, and claims are commonly made against the at-fault driver’s liability coverage.

In a no-fault state, your PIP coverage generally pays first for injury-related costs, and your right to sue the other driver for injuries may be limited unless the injuries are serious or meet a state-defined threshold.

Which States Have No-Fault Auto Insurance?

Today, 12 states are commonly recognized as no-fault states for auto insurance (plus Puerto Rico). These states are:

• Florida
• Hawaii
• Kansas
• Kentucky (choice no-fault)
• Massachusetts
• Michigan
• Minnesota
• New Jersey (choice no-fault)
• New York
• North Dakota
• Pennsylvania (choice no-fault)
• Utah

Important note: You’ll sometimes see longer lists online labeled “no-fault/PIP states.” That’s because some states require PIP coverage or require insurers to offer it, even if they don’t restrict lawsuits the same way “true” no-fault states do. If you’re not sure what rules apply where you live, check your state’s policy requirements or ask your insurer.

How Does No-Fault Auto Insurance Work After an Accident?

While the fine print differs by state, most no-fault claims follow this general flow:

Step 1: You File an Injury Claim With Your Own PIP Coverage

If you’re hurt, your first-party PIP coverage is typically the starting point. It may pay for medical treatment and related costs up to your policy limit—regardless of who caused the crash. Depending on the state, PIP may apply to you, household family members, passengers in your vehicle, and sometimes pedestrians.

PIP claims often involve deadlines and paperwork, so it’s smart to document everything (medical visits, prescriptions, time missed from work, etc.) and notify your insurer promptly.

Step 2: Vehicle Repairs Are Handled Separately

No-fault does not automatically pay to fix your car. Vehicle repairs are usually handled through:

• Your collision coverage (for crash damage to your car), or
• The at-fault driver’s property damage liability (if fault is assigned and coverage applies)

If you want the deeper breakdown of who pays for what, here’s a state-by-state-friendly explainer: who pays for damage in a no-fault state.

Step 3: Serious Injuries May Allow a Claim Against the Other Driver

No-fault laws usually limit smaller injury lawsuits. But if injuries meet your state’s legal threshold (often called a “verbal threshold” or “monetary threshold”), you may be able to pursue the at-fault driver for additional damages—like pain and suffering—or costs beyond your PIP limits.

What Does No-Fault Insurance Cover?

No-fault benefits (PIP) commonly help pay for items like:

• Medical bills and rehabilitation costs after the crash
• Lost income (often capped and/or time-limited)
• Essential services you can’t perform because of injuries (like household help or child care, depending on the state)
• Funeral expenses (in many states)

PIP coverage limits and eligible expenses vary widely. Your declarations page (and state rules) determine what’s included.

What No-Fault Insurance Does Not Cover

No-fault is not “full coverage.” Here are common gaps drivers should understand:

• Damage to your vehicle: You usually need collision coverage to repair your car after a crash.
• Damage you cause to someone else’s car or property: That’s typically handled through property damage liability coverage.
• Injuries you cause to others beyond what their PIP covers (or where lawsuits are allowed): That’s where bodily injury liability coverage comes in.
• Pain and suffering in many cases: In no-fault states, these damages are often limited unless the injury meets a state threshold.
• Medical bills beyond your PIP limit: If costs exceed your PIP coverage, you may need health insurance, MedPay (if available), or a claim against the at-fault driver where permitted.

Also, PIP is not the same thing as medical payments coverage (MedPay). MedPay is often optional and tends to be simpler but narrower, while PIP is tied to state no-fault rules and may include additional benefits like wage loss.

Michigan’s No-Fault System: One Extra Coverage to Know

Michigan has some unique features compared to other no-fault states. In addition to PIP and liability coverage, Michigan drivers may encounter property protection insurance (PPI), which is specific to Michigan’s no-fault structure.

Pros and Cons of No-Fault Auto Insurance

Potential Benefits

• Faster access to medical payments through your own insurer in many situations
• Fewer small injury lawsuits (in theory), because minor injury claims often stay within PIP

Potential Drawbacks

• Restrictions on suing for pain and suffering unless you meet a state threshold
• PIP costs can contribute to higher premiums in some markets (and rules can be paperwork-heavy)

If you’re researching why premiums can be high in certain no-fault markets, these state guides may help: Michigan and Florida.

FAQs on No-Fault Auto Insurance

Final Thoughts on No-Fault Auto Insurance

No-fault auto insurance is mainly about how injury claims get paid: your own PIP coverage typically pays first, and lawsuits for injuries may be limited unless the crash results in serious harm or meets your state’s threshold rules. The best next step is to review your policy’s PIP limit and make sure your liability and physical damage coverages match the risks you want to protect against.