Car Insurance in the US and the No-Fault Laws Only Nine States Still Run

Between 1970 and 1975, twenty four American states passed some form of no-fault car insurance law. Most of them later repealed it, and as of 2026 only nine states run a true no-fault system, with three others using a hybrid. The retreat says a lot about how hard it is to decide who should pay after a crash.

Underneath sits a tangle of coverages, limits and state rules that most drivers meet only as a premium and an insurance card. Those pieces explain why one driver's bill after a collision can look nothing like another's, even when the crash is identical.

How does car insurance work in America?

American vehicle insurance is built to cover the financial liability or the loss a vehicle owner may face if the car is involved in a collision that causes property damage or injury. Most states require a minimum level of liability insurance. New Hampshire and Mississippi do not, and Mississippi lets owners post a cash bond instead. Wisconsin takes a looser "proof of financial responsibility" approach, while New Jersey makes it illegal to operate, or knowingly allow someone else to operate, an uninsured vehicle. Maine goes further and requires insurance to rent a car.

The owner pays the insurer a premium monthly or yearly, and the insurer issues a card for the policy term to be kept in the vehicle as proof. States have begun passing laws that accept electronic versions. Policies are sold through independent agents, brokers authorised to sell on behalf of several insurers, and a growing number of online brokers.

The market is concentrated. In 2017 the biggest private passenger vehicle insurers by share were State Farm at 18.1%, GEICO at 12.8%, Progressive at 9.8%, Allstate at 9.3% and USAA at 5.7%.

Under no-fault, your own insurer pays you after a crash, whoever caused it.

What drives the cost of a policy?

Premiums are built from a long list of rating factors. The make and type of car count, and so do the driver's marital status and credit score, and even whether they rent or own their home. Insurers also weigh everyone's age and gender, driving history, and where the car is mainly driven and stored. Insurers tend to push rates up on these factors and offer discounts less often.

Business use changes the picture. Commercial cover works much like private insurance, but it excludes personal use of the vehicle, and pricing is usually higher because the coverage is wider.

What do those numbers on a policy mean?

Limits are written as strings such as 20/40/15 or 100/300/100. The first two numbers cover injuries and the last covers property damage. In the 100/300 example, the policy pays up to $100,000 per person and up to $300,000 in total for everyone hurt. The final figure pays for the other party's vehicle or anything else the driver damages.

Where a policy is a split limit, it divides bodily injury and property damage as above. A combined single limit throws both under one figure, so a crash that wrecks another car and injures its occupants draws on a single pot. Bodily injury is usually split again into a cap per person and a cap per accident.

Take the Oklahoma figures. Suppose an insured driver crashes into a carload of people and is held liable: the insurer pays up to $25,000 of one person's medical bills, never more than $50,000 across everyone hurt, and no more than $25,000 for repairs to the other vehicle. Indiana's lower property figure leaves a bigger gap for a driver who carries only the minimum. A policyholder can usually raise the limits before a loss for an extra charge.

What does liability cover, and what does it not?

Liability pays for bodily injury or property damage the insured driver is found responsible for. If a driver slides into a telephone pole, liability covers the pole and may also cover related claims, such as the phone company's loss of service, depending on the jurisdiction. If the injured party sues, it also covers court costs and any damages awarded.

It does not repair your own car. For that the policy needs collision coverage, which pays to repair the vehicle or, if it is totalled, its cash value, less a deductible. Lenders usually insist on it while a car is financed. If the borrower lets it lapse, the lienholder can buy insurance and add the cost to the monthly payments, or repossess the vehicle. A car bought with cash or paid off generally needs only liability.

Comprehensive cover, also called other-than-collision, handles fire, theft, vandalism, hail and wind damage, and impacts with non-human animals, again with a deductible. A pedestrian does not count as an animal. In one 1995 case, an intoxicated pedestrian ran into the side of a car on a freeway and the claim was denied under that heading, though courts have treated hitting a pedestrian as a collision claim.

The phrase "full coverage" is a trap. It usually means comprehensive plus collision, with liability implied, but it is a loose label with many options and amounts behind it, and it often leaves drivers badly underinsured. Careful agents avoid the term.

What other protections can a policy include?

Uninsured and underinsured motorist cover, called UM/UIM, applies when the at-fault driver has no insurance or too little. The insurer pays the insured's medical bills and then pursues the other driver. It matters: in Colorado in 2009, an estimated 15% of drivers were uninsured. Limits usually match liability limits. For underinsured cover, a 2009 survey found 29 states use a limits trigger and 20 use a damages trigger. Some states also keep unsatisfied judgment funds for people who cannot collect from an uninsured driver, though the negligent driver stays responsible for repaying the fund.

In some states drivers must buy Personal Injury Protection, which covers medical bills, lost work time and more. Loss of use cover reimburses rental costs while a covered loss is repaired. Loan or lease payoff cover, known as GAP insurance, dates from the early 1980s.

For rental cars, liability from a private policy usually extends to the rented vehicle, and so do comprehensive policies, though that should be checked beforehand. Credit card companies such as Visa and MasterCard can supply extra collision damage cover when a card pays for the rental, but the benefits are restrictive about which vehicles qualify.

What does no fault car insurance mean?

Under no-fault insurance, you are paid by your own insurer after a crash, whoever caused it. The policyholder and passengers are reimbursed without proof of fault, and in return their right to sue other parties through the courts is restricted. The aim is lower premiums and quick payment by avoiding expensive arguments about who was to blame.

The scope is narrower than it sounds. No-fault systems deal with bodily injury. Damage to vehicles and their contents is still settled on the basis of fault. Medical bills for drivers and companions are paid whoever caused the crash. Some systems pay set compensation for certain injuries, though not all do.

Where did the idea come from?

By the mid-1960s deaths and serious injuries on the road had fed a litigation explosion that was overwhelming courts in places. Professors Robert Keeton of Harvard and Jeffrey O'Connell of the University of Illinois proposed a fix in the Harvard Law Review. Every owner would buy "basic protection coverage", a victim would claim net economic loss from their own car's insurer, and fault would matter only for damages above $10,000 for bodily injury, with a $100 deductible. Pain and suffering was excluded. Some commentators judged the plan too radical.

Michael Dukakis, then a Massachusetts state representative, introduced a modified version in 1967, and the state adopted it in 1970. Challenged on constitutional grounds, it was upheld unanimously by the Supreme Judicial Court of Massachusetts. That ruling opened the way for widespread adoption, with encouragement from the federal Department of Transportation.

Which states use no-fault today?

Most states keep a traditional tort system, where recovery depends on proving negligence. One count puts it at twelve states and Puerto Rico requiring policyholders to live under no-fault, while a 2026 tally gives nine true no-fault states and three hybrids. Another eight run an add-on system that lets the insured still sue. Kentucky, New Jersey and Pennsylvania offer a choice between full tort and limited tort when the policy is written or renewed. Kentucky and New Jersey assign the no-fault option to anyone who does not choose, while Pennsylvania defaults to full tort.

No-fault systems differ in how they let people sue for pain and suffering, which is generally allowed only for exceptionally serious injury. A monetary threshold sets a medical spending figure that must be passed first: Kansas uses $2000, Kentucky $1000, Massachusetts $2000, Minnesota $4000, North Dakota $2500, Utah $3000, and Saskatchewan $90,000. The weakness is that it can tempt people and providers to inflate bills, and without indexing, inflation wears it down. A verbal threshold lists categories such as death, permanent disability or disfigurement instead. It removes the incentive to pad costs, but a seriously injured person whose injury misses the wording can be barred.

In Canada, Manitoba and British Columbia are listed as pure no-fault, and Alberta is listed as transitioning from 1 January 2027. Quebec applies the approach only to bodily injury from collisions, and Saskatchewan gives drivers a choice.

Is no-fault better?

Supporters argue that crashes cannot be avoided altogether, and that drivers who cause them are not automatically the worse risk or in need of punishment. They also point out that liability insurance shields reckless drivers from the financial sting of litigation, and that where many motorists are uninsured, a system that pays from your own policy can make more sense.

Critics reply that drivers who do not pay for the damage they cause may behave worse, facing only higher premiums. In British Columbia, rallies took place in Vancouver and Victoria after ICBC moved to its Enhanced Care model, with opponents saying the loss of most rights to sue leaves badly hurt victims with no meaningful legal route. Other complaints are that some no-fault jurisdictions charge among the highest premiums nationally, although that may be effect rather than cause, and that states mandating no-fault show higher fraud rates among medical providers and personal injury lawyers. A 2012 RAND Corporation study found costs were higher in no-fault systems.

What happened in Michigan and New York?

Michigan's system was unusual. Before 2019 drivers had to buy personal injury protection with unlimited, lifetime medical cover. It protected people with catastrophic injuries, but premiums drew complaints. A 2019 reform created PIP Choice, with medical limits of $50,000 for drivers on Medicaid, $250,000, $500,000 or unlimited. Drivers on Medicare may be able to forgo no-fault medical cover. Even so, Michigan's average annual rates remain the nation's highest, and Detroit tops every other city. The reforms also reduced compensation to some caregivers. In 2023 the state's Supreme Court ruled that the cuts to provider fees are not retroactive.

New York runs a comprehensive system under Article 51 of its Insurance Law. Motorists must carry PIP, which pays medical expenses, lost wages and other reasonable costs whoever caused the crash. Suing for non-economic damages is allowed only after a "serious injury" under the statute's definition, which includes significant disfigurement, a fracture, or lasting loss of use of a body part. Claims for benefits generally must be filed within 30 days of the accident.

Where this goes next

The map keeps shifting. Colorado dropped its no-fault system in 2003. Florida's lapsed on 1 October 2007, and a new law took effect on 1 January 2008. In Canada, Alberta is listed as moving to a pure no-fault model from 1 January 2027. Michigan has already traded unlimited medical cover for a choice of limits, aiming to make insurance more affordable, though its rates remain the highest in the country.