D. Gilson is a writer and author of essays, poetry, and scholarship that explore the relationship between popular culture, literature, sexuality, and memoir. His latest book is Jesus Freak, with Will Stockton, part of Bloomsbury’s 33 1/3 Series. His other books include I Will Say This Exactly One Time and Crush. His first chapbook, Catch & Release, won the 2012 Robin Becker Prize from Seve...

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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Reviewed by Jeffrey Johnson
Insurance Lawyer

UPDATED: Jul 19, 2021

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If you’ve recently renewed a car insurance policy, you may have experienced sticker-shock based on an increase in the cost of your premium. When insurers issue rates, there is always a reason. And despite the myth that auto insurers are not regulated, each state regulates the companies that sell car insurance, and they also have strict guidelines as to how much they sell it for.

Because car insurance is regulated on a state-by-state basis, where you live has a tremendous impact on your policy premiums. There are two basic types of auto insurance systems: “no fault” and “at fault” (this is normally referred to as tort). We’ll be the first to admit that having varying systems, with each state having its own specifics and guidelines, can be quite confusing.

The typical form of no-fault coverage is Personal Injury Protection which covers medical expenses, loss of income, and wages for the driver and the passengers, unlike bodily injury liability coverage which covers medical costs in case you have caused the accident. It does not cover property damage liability or car repairs. PIP coverage ensures that all drivers get care for their injuries and compensation for the cost without identifying who caused the accident.

For those who live in states with a no-fault system (twelve states have no-fault laws in place – Florida, Hawaii, Kansas, Kentucky, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Pennsylvania, Utah and the District of Columbia) the difference in tort states can be overwhelming. And the same can be said of those who drive in tort states who have no idea how no-fault systems work.

Quite simply, in a no-fault state, drivers are responsible for damages to their own vehicles and sometimes their own medical bills in the case of a collision with another driver. This is the case regardless of whether or not they were the negligent driver in the accident. Drivers in no-fault states are also normally required to carry personal injury protection coverage (PIP).

In fact, in instances of adjudication, the courts of no-fault states make no effort to determine who was at fault in an accident in most cases. In extreme circumstances, such as crashes that feature exceptionally high medical bills or property damages, the court system may be compelled to make such a determination, but there are limited instances in which this will happen.

Claimed benefits of no-fault insurance:

  • Efficient payment of claims
  • Reduced load on courts, with no need to hire attorneys
  • Insurance premiums should be lowered

Claimed negatives of no-fault insurance:

  • There are specified limits on when you can sue
  • No incentive to be a good driver, other than policy premiums
  • Insurance fraud is a pervasive issue in no-fault states
  • Evidence points to no savings on insurance premiums, and in many cases, premiums have proven to be higher

Tort states and the tort system of insurance for personal injury claims are more common. In a tort or “at-fault” state, the driver who is responsible for an accident must pay the costs of an accident or at least a proportional amount of the fees incurred by the other driver – tort systems often assign blame as a percentage, rather than singling out an individual driver. The damages related to an accident are paid out through the negligent party’s liability insurance coverage. Many people living in at-fault states choose to purchase uninsured/underinsured motorist coverage because it offers protection from damages caused by someone who does not have liability insurance or has very low coverage limits on their policy. Medical Payments coverage is also popular in these states, as it offers additional protection in the case of injuries from automobile accidents, making it less likely a person will have to deal with the hassle of finding a personal injury attorney and filing a lawsuit. Most auto insurance companies offer these forms of coverage in at-fault states, but keep in mind any optional coverages added to your auto policy will increase your insurance premium.

Every state has its own methods to determine the at-fault driver and the percentage of fault of each driver as well as different systems for paying minor accident injuries. In tort states, insurance claims may not be paid until after fault is determined, sometimes after a lawsuit.

While we’re not going to jump in the fracas of which system is better, we do know this: Proponents of no-fault car insurance point to the high court fees that both drivers and car insurance companies take on to do business in tort states; and proponents of tort systems insist that fault-driven insurance is inherently a more fair system. They contend that drivers should never be penalized for being involved in an accident that they didn’t cause.

Another interesting fact is that since the introduction of the no-fault insurance concept, 24 states have enacted (and many have repealed) such systems. And one final note about no-fault vs. tort based systems. Three states – Kentucky, New Jersey, and Pennsylvania – have mixed systems that allow a policyholder to choose which system they have: traditional tort or no-fault. These choice-based systems require all policyholders to select between the two at the time a policy is issued or renewed. Once this occurs, a policyholder cannot convert to the other system without a full policy rewrite. In Kentucky and New Jersey, consumers who do not make a choice will be assigned a no-fault option by default; and in Pennsylvania, the tort option is the default for those who do not specify a choice. Drivers who select limited tort insurance reduce their ability to sue for damages related to auto accidents.