No-fault insurance is an auto insurance system where, after an accident, each driver's own insurer pays for that driver's medical bills and certain expenses—regardless of who caused the crash. The goal is to get people paid quickly and to cut down on lawsuits over minor accidents. It's most associated with auto coverage, often through Personal Injury Protection (PIP).

Why it matters

In a traditional "fault" system, you have to prove the other driver was negligent before their insurer pays your injury costs, which can take months and end up in court. No-fault flips that: your own policy pays your medical expenses right away. Whether a state uses no-fault, a traditional fault (tort) system, or a hybrid varies by state, so treat this as a conceptual model.

A simple example

Two cars bump into each other on a snowy road. Both drivers have minor whiplash. In a no-fault state, each driver's own insurer pays that driver's medical bills through PIP, and they generally don't sue each other over those smaller injuries. Everyone gets treated and reimbursed without first arguing about blame.

Don't confuse it with…

No-fault does not mean "no one is ever responsible" or that you can't be sued. No-fault laws may restrict tort suits below a threshold: a monetary (dollar) threshold based on medical expenses, or a verbal threshold that describes the seriousness of the injury in words (such as death or serious disfigurement). An injury that meets the threshold can still be taken to court against the at-fault driver.

Related terms: the ISO Personal Auto Policy's Out of State Coverage provision supplies another state's required no-fault coverage when the insured drives there, and the ISO business auto program uses covered auto symbol 5 for owned autos subject to no-fault. Workers compensation is also a no-fault system, for job injuries.

On the exam

Connect no-fault with PIP and the phrase regardless of fault. Know that no-fault is designed to reduce litigation and speed up payment, that PIP pays the insured's own medical expenses and lost wages regardless of fault, and that monetary or verbal thresholds decide when a lawsuit is allowed. Whether a state has no-fault, and what PIP must pay, is a state-by-state choice.