If you live in a state with no-fault auto insurance, you need to understand what it does and doesn’t do.

No-fault requires drivers to carry auto insurance for their own protection, and places limitations on their ability to sue other drivers for damages.

First, understand that some states are called “no-fault” states and others are “tort” states, also called “choice” states.

Although laws vary from state to state, here’s the basic premise: When you have an accident in either a tort or no-fault state, your car insurance company pays for any injuries you sustain.

No-fault state

When it comes to physical damage, if someone hits you in a no-fault state, your insurance company pays to fix your car and may then go after the other guy’s insurance company if your company believes it was the other party’s fault. Any other drivers involved will be covered by their auto insurance policies.

Tort state

If someone hits you in a tort state, you can have your insurance company fix it. Or, you can leave them out of the picture and have the other driver’s insurance company handle the details. That means you would not have to worry about reporting the accident to your insurance company or paying a deductible.

A little of both

No-fault was designed as an antidote to the traditional tort system in which the wronged party would sue the driver responsible for the accident to recover for bodily injuries. Under a pure no-fault system, neither party would be able to sue the other. However, no state uses a pure system because they’re leery of denying a citizen’s right to sue. Instead, all no-fault states use parts of both the no-fault system and the tort system (under which you’re financially responsible for the cost of damages you cause) by permitting lawsuits in certain cases.

If you want to make sure you have the best coverage for your needs, you want to find out which kind of system your state has.

States with no-fault insurance

  • Florida
  • Hawaii
  • Kansas
  • Kentucky
  • Michigan
  • Minnesota
  • New Jersey
  • New York
  • North Dakota
  • Utah
  • Washington, D.C.