No-Fault Insurance
An auto insurance system in which each driver's own insurer pays their medical expenses after an accident, regardless of fault.
What is No-Fault Insurance?
No-fault insurance is an auto insurance system in which each driver's own insurance company pays for their medical expenses, lost wages, and certain other costs after a traffic accident regardless of who was legally responsible. This system — implemented through Personal Injury Protection (PIP) coverage — reduces litigation by eliminating the need to determine fault before medical bills are paid. Twelve U.S. states and Puerto Rico operate under true no-fault systems that restrict the right to sue for pain and suffering except in cases meeting a threshold of injury severity or dollar amount. No-fault does not apply to vehicle damage claims, which remain fault-based.
Example
A driver in Michigan — a no-fault state — is rear-ended at a stoplight. Regardless of the other driver's clear fault, the injured driver files a PIP claim with their own insurer to cover $18,000 in emergency room and physical therapy bills. The at-fault driver's insurer is responsible for vehicle property damage, but medical costs are handled directly by each party's own policy, avoiding a lawsuit over liability.
Source: National Association of Insurance Commissioners — Auto Insurance