There’s no limit to how confusing auto insurance can be, yet when a horrible accident occurs, we’re left at the mercy of what we already understand about our coverage. If you don’t enjoy deciphering a curious term within the fine print of a policy or calling a busy service line for advice, then you’re not alone.

Most people don’t know auto insurance stretches out into several branches of coverage types and that’s where it becomes necessary to learn about each. You never know if you’ll crash into a monument or get into an accident with another car and end up with a broken leg. This is why car insurance is so important.

Even though those two types of accidents would involve your vehicle, the damages and the process of making a claim are much different. One specific type of insurance that could be helpful if you have an accident is no-fault insurance.

Definition and origins of no-fault insurance

No-fault insurance, or personal injury protection insurance (PIP), is a type of automotive insurance that covers your own or any of your passengers’ medical expenses, no matter which driver is at fault in a car accident. Any income that is lost due to being hospitalized and absent from work may also be covered.

According to the Centers for Disease Control and Prevention (CDC), around $33 billion in work income was lost due to crash injuries in 2012. On top of that, medical costs totaled $18 billion - with 75% of that occurring during the first 18 months after a crash injury. With these types of numbers for modern, safety-inspected vehicles, it’s no wonder that no-fault insurance was written into legislation back in the 1970s.

For the first time ever, people were able to purchase PIP insurance to cover medical expenses caused by accidents. Since then, some states now legally require drivers to obtain this type of insurance or some variation of it.

Requirements by state

If you live in a no-fault insurance state, then there’s a strong likelihood that a base coverage limit must be met within your policy. In other words, you must have your vehicle insured with PIP coverage to legally drive in your state. Some states may not require PIP coverage, but do offer it as an option.

The following 16 states currently require no-fault/PIP coverage:

  • Michigan
  • Minnesota
  • Utah
  • Pennsylvania
  • Oregon
  • North Dakota
  • New Jersey
  • New York
  • Massachusetts
  • Arkansas
  • Delaware
  • Florida
  • Maryland
  • Kentucky
  • Hawaii
  • Kansas

Optional no-fault/PIP insurance is offered in the following 7 states:

  • Virginia
  • Washington
  • Wisconsin
  • Texas
  • South Dakota
  • New Hampshire
  • District of Columbia

Making a no-fault insurance claim

If you live in a no-fault insurance state, there are some guidelines as to how to make a claim. For instance, instead of giving a statement to the other party’s insurance provider, you work exclusively with your own insurer.

Depending on what your policy requires, you may need to provide your insurer with a statement and medical proof of damages relating to the accident. Your insurance company may often appoint the physician or hospital responsible for examining you after an accident.

You may not have a choice on where you can get treatment, but working with these insurance-approved doctors or hospitals ensures that your claim gets processed in the quickest way possible. Legal proceedings, paperwork and treatment can easily become unmanageable.

That’s why it’s necessary to provide your insurer all of the information they ask for after an accident or they may completely deny coverage altogether.

>>Related: 5 surprising factors that can lower your car insurance

No-fault insurance covers your own or any of your passengers’ medical expenses, no matter which driver is at fault in a car accident.

Limitations to coverage

Like you would require different shampoo for different hair types, you require different insurance coverage in different accidents.

Let’s say that you hit a building of a business and the building owner does not have enough insurance coverage to pay for the damages. In this case, you would want to have auto insurance with property damage to pay for your part in the accident.

With no-fault coverage, it only pays for specific types of damage in an automobile accident. Here are the following types of damages that may be paid for with PIP insurance:

  • Personal or passenger injuries and medical expenses resulting from the accident
  • Funeral expenses in fatal accidents
  • Loss of income due to the inability to work (medical recovery after accidents)

Now as you may see, there is no coverage that pays for damage to your vehicle or buildings. If your accident involved damage to your vehicle, you’d want to purchase an additional type of auto insurance such as collision insurance.

>>More coverage, lower rate: Get an insurance quote

Is no-fault right for you?

While health insurance may be an alternative to no-fault insurance, it doesn't offer the same coverage for serious accidents and you will usually pay a deductible.

if you're not sure whether PIP coverage is right for you, here are a few things to consider.

  1. Could you get in a serious car accident based on your living situation?
  2. Can you afford all of the injury expenses associated with accidents?
  3. Would you have peace of mind knowing these expenses are covered?

Knowing that you and your passengers will be fully taken care of in an accident can be all that it takes to determine if it's the right option for you and which limits to set in your policy.