How Does No-Fault Car Insurance Work?

A car accident creates costs that must be paid. For this reason, many states have laws that require drivers to carry car insurance. However, the type of car insurance that a motorist must carry varies from state to state. Some states may require liability only; others may require something called "no-fault" car insurance.

No-fault car insurance works in a distinctly different way than traditional car insurance. With traditional car insurance the at-fault party pays for the damages to the other driver's person and property and possibly his own damages if he is carrying full coverage insurance. The big problem with this type of insurance is that often the at-fault party does not want to take responsibility for the accident. This creates a situation where the non-faulty party must take the at-fault party to court, costing both parties money and taking up the court's time.

The solution to this is no-fault car insurance. No-fault insurance works like this:

• Each party carries their own car insurance.


• When at accident happens, no one takes the blame.


• Both parties file claims with their own insurance companies for damages to their own property.


• Those without insurance will not be hurting anyone but themselves.

Although no-fault insurance laws are enacted to help free up the courts time, all no-fault states still allow injured parties to sue the at-fault party in extreme circumstances, like severe injury or gross negligence on the part of the at-fault party. 

To further make these laws more "fair," many no-fault states do not let uninsured drivers off the hook. In these states, at-fault drivers who are not insured can still be held at-fault for damages that they cause. 

No-fault U.S. states include:

• Florida


• Hawaii


• Kansas


• Massachusetts


• Michigan


• Minnesota


• New Jersey


• New York


• North Dakota


• Pennsylvania


• Kentucky


• Utah

It is important to keep in mind that not all no-fault car insurance laws are the same and each state has its own version of these laws. For example, some states allow injured parties to sue the at-fault party if their damages reach a certain dollar amount.