Is Insurance In a No-Fault State More Expensive?

Last Updated on September 2, 2020

America can be separated into two types of insurance systems: no-fault states and traditional liability states. Is car insurance in a no-fault state more expensive? Or are the two systems roughly equal?

Today, we’re explaining everything you need to know about no-fault car insurance and pricing.

Is Insurance In a No-Fault State More Expensive?

What is No-Fault Car Insurance?

Twelve states in America use no-fault car insurance systems. Under this type of car insurance system, drivers are compensated for certain damages no matter who is at fault.

In most states, the person who caused the accident will pay for some or all of the damages. This is how car insurance works in most states.

In no-fault states, however, your own insurance carrier will cover some or all of your expenses even if you didn’t cause the accident.

In many no-fault insurance states, policies like personal injury protection (PIP) or medical payments coverage (MedPay) are bundled into insurance policies. These policies cover your medical expenses and other costs.

How Does No-Fault Insurance Work?

In most states, the insurance claim is awarded based on who is at fault for the accident. If one driver was 100% at fault for the accident, for example, then that driver is required to cover 100% of the damages.

In a no-fault state, claims are paid out regardless of who is to blame.

If you caused the accident, then your own insurance company would cover your own damages, and the other driver’s insurance company would cover his own damages.

If the other driver caused the accident, then the same thing occurs: the other driver’s car insurance company would pay for his own damages, while your car insurance company would pay for your own damages.

No-fault states also have other unique insurance rules.

Some no-fault states set limits for how much your insurance company will pay you, for example, while other states have no limits whatsoever.

No-Fault states also may set limits on when you can file a lawsuit against the other driver. You may only be able to file a lawsuit for medical bills, for example, if you have significant medical bills or serious injuries. These rules are in place to prevent unnecessary litigation.

Which States Use No-Fault Insurance Systems?

As of 2020, twelve states (and Puerto Rico) use a no-fault auto insurance system. The twelve states include:

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

Certain states have repealed their no-fault insurance systems. Nevada, Pennsylvania, Georgia, Connecticut, and Colorado all had no-fault insurance systems at one point but later repealed them.

Is No-Fault Car Insurance More Expensive?

To answer the question of whether or not no-fault car insurance is more expensive, let’s consider the list above, then compare it to the list of the most and least expensive states for car insurance.

The Zebra recently published a report highlighting the “State of Auto Insurance”. The report found that car insurance rates rose in 40 states and fell in just 10 states in 2019. The report also found the typical American pays annual car insurance premiums of around $1,470, although drivers in some states pay nearly twice that.

Top 10 Most Expensive States for Car Insurance

  1. Michigan: $2,693
  2. Louisiana: $2,339
  3. Rhode Island: $2,110
  4. Florida; $2,059
  5. Nevada: $1,915
  6. Kentucky: $1898
  7. Delaware: $1,828
  8. Texas: $1,827
  9. California: $1,815
  10. New York: $1,688

Top 10 Least Expensive States for Car Insurance

  1. Maine: $896
  2. Virginia: $918
  3. North Carolina: $947
  4. Iowa: $988
  5. Idaho: $1,018
  6. Ohio: $1,032
  7. Wisconsin: $1,070
  8. Vermont: $1,075
  9. Hawaii: $1,081
  10. New Hampshire: $1,105

Are No-Fault States More Expensive?

What do the above numbers tell us about no-fault states and the price of car insurance? Consider the following:

  • Four of the ten most expensive states for car insurance (Michigan, Florida, Kentucky, and New York) are no-fault states.
  • Only 24% of states in America (12/50) are no-fault insurance states, yet 40% of the top 10 most expensive states for car insurance are no-fault states.
  • No-fault states occupy two of the top four spots on the list, with drivers in Michigan and Florida paying over $2,000 per year for car insurance – over twice what drivers pay in the least expensive states.
  • Of the least expensive states for car insurance, only one (Hawaii) is a no-fault state. Furthermore, Hawaii has notoriously cheap car insurance premiums for other reasons (like nice weather and less road mileage than most other states).
  • Not all no-fault states are expensive. Utah, Minnesota, North Dakota, and Massachusetts are all among the top 20 cheapest states for car insurance.

Generally, No-Fault Insurance States Have 10 to 15% Higher Premiums

Critics of no-fault insurance systems will tell you that these no-fault systems are more expensive. Supporters of no-fault insurance systems claim these systems reduce litigation, fraud, and unnecessary medical expenses.

Fraud: Under no-fault insurance systems, claims are paid out regardless of fault. Some insurance experts believe no-fault insurance systems increase rates of insurance fraud because they give everybody an incentive to falsify accidents or exaggerate injuries. Others argue the opposite.

Higher Filing Costs: No-fault insurance claims are more expensive to file for insurers.

Repeat Offenders: Under no-fault insurance systems, reckless drivers do not face a strong financial penalty for accidents. Repeat offenders pay less than they would in other states, and there’s less deterrence to avoid future accidents.

Uninsured Drivers: The average insurance premium in Detroit, Michigan is well over $4,000 per year. Many people cannot afford that – so they drive without insurance.

Ultimately, data shows that drivers in no-fault states tend to spend about 10 to 15% more on car insurance than drivers in other states.

However, drivers in these states may save thousands on medical costs and litigation expenses because no-fault states limit the number of lawsuits and medical bill compensation awarded after an accident.

Final Word: Car Insurance Premiums Depend on Many Different Factors

Ultimately, car insurance premiums are based on many different factors. Yes, some drivers in certain regions – including no-fault states – will pay higher rates for car insurance.

Other factors – like a region’s weather, crime rate, and accident rate – may play a bigger role in car insurance.

Whether you live in a no-fault state or a traditional liability state, you can pay lower rates on car insurance by shopping online today. Compare insurance quotes today and start saving on car insurance.

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