No-fault insurance is coverage that protects you and your passengers if you're involved in a car accident. It helps cover your medical bills and theirs, regardless of who’s at fault. So if you slide into a guardrail on a rainy day and break your arm, your PIP insurance covers your healthcare costs, minus any applicable deductibles.

Also called personal injury protection, or PIP, no-fault insurance is a common component of many car insurance policies, and it’s required in certain states. Here’s what it is, how it works, and the pros and cons of no-fault insurance laws.

How no-fault coverage is different

In a no-fault insurance state, drivers must file a claim with their own insurance company after an accident — no matter who’s at fault — to pay for their own and their passengers' medical bills. In a serious accident involving severe bodily injury and expensive medical care, the at-fault party can be sued.

In an at-fault, or tort, state, the at-fault driver's insurance covers all associated costs, including medical bills for other parties and their car repairs.

Is no-fault the same as liability coverage?

No. Liability insurance covers property damage and injuries to others in an accident — it does not cover your own losses. Drivers in no-fault states typically need to carry liability insurance and PIP.

Even in no-fault states, the at-fault driver's liability policy generally compensates the other party for damage to vehicles or property.

How no-fault car insurance works

After an auto accident, if you or one of your passengers is injured, your PIP coverage will kick in and cover healthcare expenses, up to your policy limit. Here are some other common things no-fault insurance might cover:

• Trips to the emergency room

• Hospital stays

• Medical bills

• Lost wages due to injury

• Costs of services like house cleaning and childcare for injured parties

• Funeral expenses for your passengers

As mentioned, it's possible to sue for damages in many no-fault states, though certain criteria need to be met. For instance, your medical costs may need to exceed a specific amount or your injuries will need to be serious. Criteria vary by state.

Do you live in a no-fault state?

Most U.S. states are at-fault, or tort, states. Currently, just 12 states have no-fault insurance systems. Puerto Rico is also a no-fault jurisdiction.

1. Florida

2. Hawaii

3. Kansas

4. Kentucky

5. Massachusetts

6. Michigan

7. Minnesota

8. New Jersey

9. New York

10. North Dakota

11. Pennsylvania

12. Utah

While most states on this list have true no-fault insurance systems, Kentucky, New Jersey, and Pennsylvania have what are known as choice no-fault systems. In these states, drivers can choose whether they want to add PIP coverage.

In other states, PIP coverage is offered as add-on car insurance coverage. Those states are:

1. Arkansas

2. Delaware

3. Washington, D.C.

4. Maryland

5. New Hampshire

6. Oregon

7. South Dakota

8. Texas

9. Virginia

10. Washington

11. Wisconsin

Some former no-fault states have changed to a tort system instead. For instance, Colorado, which had been a no-fault state since 1974, repealed its no-fault laws in 2003. Lawmakers in other tort states are considering this change, so it’s important to stay up-to-date on your state’s laws.

Pros and cons of no-fault car insurance

Pros:

• Faster claims processing

• Reduced litigation

• Coverage for healthcare costs, even if the other driver was uninsured/underinsured

Cons:

• Legal recourse may be limited

• Insurance premiums may increase even if you aren’t at fault

• Auto policies may be more expensive due to additional coverage requirements

Factors to consider when choosing insurance in no-fault states

If you live in a no-fault state and are shopping for car insurance, there are a few things to consider before you choose a policy.

First, it’s essential to understand your state’s insurance coverage requirements, and if PIP is optional or required. Your state department of motor vehicles should be able to provide this information.

In states where PIP is required, talk with prospective insurance companies about how much coverage makes sense for your situation. While most states have minimum coverage amounts, you may want additional coverage to ensure you’re adequately protected.

As mentioned, some states are choice no-fault states, while others are tort states where PIP is optional. If you live in one of these states, you’ll need to determine if you want the added peace of mind that comes with PIP coverage. Some drivers may feel their liability insurance and health insurance are enough.

In certain states, medical payments coverage, or Med Pay, may be optional if you want additional protection. Like PIP, Med Pay can cover medical expenses associated with injuries to you or your passengers, but its scope is more limited. For instance, it probably won’t cover lost wages due to a lengthy hospital stay.

And with any new insurance policy, it’s important to look at exclusions, out-of-pocket expenses and your deductible. Compare carriers before signing up for new coverage.