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What does no-fault state mean?

Elizabeth Rivelli Maggie Kempken
Written by
Elizabeth Rivelli,
Edited by
Maggie Kempken
Published on August 08, 2024 | 9 min read

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Two cars in collision on roadway
Tom Merton/Getty Images

Key takeaways

  • States can be either designated as no-fault or at-fault for car insurance
  • the difference determines how certain types of claims are handled, not whether anyone is actually at fault for the accident.
  • In no-fault states, each party carries insurance that pays for their own injuries, while the at-fault party typically pays for everyone’s property damage.
  • In at-fault, or tort, states, insurance for the driver who causes the accident pays for both injuries and damage.

The process for paying out claims after an accident can be important for drivers to understand. It’s not so simple, however, because state laws and insurance regulations that govern this process differ across the U.S. All 50 states use one of two insurance systems—no-fault or at-fault—and where you live determines how fault is determined and claims are paid out after an accident, as well as the types of coverage you need to purchase to drive legally. Bankrate’s insurance editorial team created this guide to help you make sense of this complex process and understand why claims are handled as they are if you are in an accident that caused injuries or damage.

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What does “no-fault state” mean?

There are numerous car accident scenarios that can take place, and while each accident may be unique, there are standardized ways of handling the aftermath.  The claim will be handled according to the state’s fault laws. Currently, 12 states and Puerto Rico follow no-fault insurance laws, with the remaining states and Washington, D.C. being considered at-fault states. In a no-fault state, both parties will file a claim with their own insurer to help pay for their own injuries, regardless of who is at fault. The insurance company of the driver who caused the accident will also be responsible for paying for property damage expenses of both parties. In an at-fault state, all claim expenses, including injuries and property damage, are the responsibility of the at-fault driver.

What are choice no-fault states?

Three states allow policyholders to choose between a no-fault type of insurance policy and a standard tort policy. Drivers who choose a limited tort policy typically pay a lower premium because they limit their right to sue for non-economic losses. However, drivers who choose the full tort option retain the ability to sue for monetary and non-monetary losses. States that offer this option are:

  • Kentucky
  • New Jersey
  • Pennsylvania
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Tort is defined as a wrongful act that causes loss or harm to another individual. In the world of car insurance, tort refers to the ability to sue the negligent driver for the damage they caused. Tort states or at-fault states allow the injured party to sue for economic damages, such as medical payments and vehicle repairs, along with non-economic damages, such as pain and suffering.

Accidents where you are not at fault

So how does car insurance work when you are not at fault for an accident? In the event of a not-at-fault accident, meaning an accident you did not cause, the claim will be handled based on the state’s fault laws. Remember that a not-at-fault accident and no-fault accidents are two separate things; not-at-fault accidents happen in both no-fault and tort states.

If you get hit by another driver in a no-fault state, your PIP coverage is designed to pay for your injuries and, typically, the injuries sustained by your passengers up to your policy limit. It may also pay for lost wages if you cannot work and for the expenses associated with hiring someone to handle household tasks that you cannot complete while injured. The at-fault driver’s car insurance should still cover the cost of your vehicle’s repairs.

If you get hit by another driver in an at-fault state, the at-fault driver’s car insurance should pay for your medical bills and vehicle repairs. However, in tort states, you may still have the option to purchase PIP coverage or medical payments coverage. These options will pay for your medical bills and, usually, the bills of passengers in your car who were injured, regardless of who caused the accident. If your insurance company issues a payout under these coverage types, it will likely work to be reimbursed by the at-fault driver’s company in a process called subrogation.

Car insurance and negligence

When it comes to car accidents, it is not always clear which driver was responsible. Some accidents are complex, and fault is not always obvious. In situations where both drivers are partially at-fault, insurance companies will usually look at the amount of negligence that each driver had.

Negligence typically falls into three categories — pure contributory, pure comparative and modified comparative. Every state has a different definition of negligence, so where you live and the amount of responsibility you assume in an accident will both impact how your claim is handled.

How is fault determined in a car accident?

The details of each accident will vary, but the process of determining fault after an accident is usually the same. In an at-fault state, fault is determined by the party that caused the accident. The drivers involved in a car accident may also discuss fault at the scene of the incident and in some cases, a driver admits guilt.

  1. The police will analyze the scene to try to understand who is at fault. This may involve making a diagram of the incident and noting the extent and location of vehicle damage on the police report.
  2. The report will be shared with the drivers’ car insurance companies to review. Your car insurance company will decide which claims your policy fulfills and which ones it does not.
  3. Each insurance company will get statements from both drivers involved in the accident. Your insurance company will seek a payout from the other driver’s insurance provider if the other party involved is the at-fault driver.

Frequently asked questions

Written by
Elizabeth Rivelli Arrow Right Icon
Contributor, Insurance
Elizabeth Rivelli is a contributing insurance writer for Bankrate and has years of experience writing for insurance domains such as The Simple Dollar, Coverage.com and NextAdvisor, among others