What is No-Fault Insurance? (2020)

Understanding how no-fault insurance works

By Taylor M Haines, Independent Agent

October 13, 2020



One of the recurring questions I am asked as an insurance agent is "what is no-fault insurance?" or "how does no-fault insurance work?". If you live in a state where car insurance operates on a no-fault basis, it is important to understand exactly how it works - and how it impacts you as an insured.


What is No-Fault Insurance?


The easiest way I explain no-fault to my customers is this: Regardless of who is at-fault in causing the accident, your Personal Injury Protection (PIP) will always primarily pay for your injuries up to the policy limits.


Unless injuries reach a certain threshold, you are unable to sue the other driver (regardless of accident fault) for damages to your person. It is very important to understand your Personal Injury limits on your policy and make sure you maintain adequate limits.


The opposite of a no-fault state is a tort state. In a tort state, the driver that caused the accident is responsible for paying the injured party's medical costs. However, bear in mind that this can be reduced if the insurance companies find that each driver shared some fault in the accident.


Am I in a No-Fault state?

Car insurance can operate in one of two ways, depending on if your state is a "no-fault" state or a "tort" state. The following states are true no-fault states:

  • Florida

  • Hawaii

  • Kansas

  • Massachusetts

  • Michigan

  • Minnesota

  • New York

  • North Dakota

  • Utah

(Kentucky, New Jersey, and Pennsylvania are mixed states - where the ability to purchase traditional tort or no-fault rests with the policyholder.)


What are the parts of No-Fault in New York?

Since our agency is based out of New York, we will examine the no-fault benefits available to drivers in our state;

  1. Statutory Personal Injury Protection ($50,000 - Fixed) Under NYS law, all policies sold in the state of New York must contain $50,000 in Personal Injury Protection. You cannot refuse or lower this coverage. If you purchase a liability insurance policy in New York, your policy will automatically have this coverage. This is the primary coverage that pays for your injuries in a motor vehicle accident.

  2. Additional Personal Injury Protection (APIP) (Variable) This is an optional coverage, $25,000, $50,000, or $100,000 that drivers may choose to add to their statutory coverage. These limits are stacked, meaning that they will add to the statutory PIP limit above. This is the next coverage that will be used to cover your injuries, should your statutory limits become exhausted.

  3. Optional Basic Economic Loss (OBEL, $25,000 - Fixed) This is an optional $25,000 coverage that covers medical expenses and lost wages. Typically, the charge for OBEL is quite minimal, and I recommend every driver purchase it - even if you reject the APIP. This coverage also stacks onto the APIP and statutory PIP coverage.

The combination of all these coverages added up is called the Aggregate No-Fault Benefits. It can be as minimal as $50,000, if you only select the statutory coverage, or max out at $175,000 should you choose all coverages. I always recommend my clients purchase the maximum in almost every situation; there is no dollar amount that you can put on your health.


Understanding how no-fault insurance works is critical to making sure you have adequate limits on your policy. For a no-cost review of your insurance, request an appointment with one of our agents today at encompassupstate.com


Taylor M. Haines Is the Vice President of Operations for Encompass Agency, Inc. of North Tonawanda, NY. Encompass represents more than 1,500 individual clients across 3 states for both personal and commercial lines of insurance. Originally from Skaneateles, NY, he moved to Buffalo in 2009 and is a graduate of the University at Buffalo (B.A., 2013) and SUNY Buffalo State College (M.S., 2016). For email inquiries, please send to taylor@encupstate.com

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