Define No-Fault Insurance
No fault auto insurance policies cover medical bills and lost wages resulting from a car accident. If you have a no fault policy, it will pay regardless of who was responsible for the crash or collision. In theory this saves on costs, paperwork and court time, as you don't have to sue anyone to pay your bills, but in many cases you'll still need legal action or liability coverage.
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Coverage
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No fault insurance is sometimes called personal injury protection (PIP) because it covers your injuries or those of your family, up to the limits of your policy. However, it doesn't pay for property damage or car repairs, so you might want more coverage than just PIP. Your state may require you to purchase more: Florida, for example, requires you to purchase property-damage liability insurance to cover damage you cause while driving. If you're found at fault in an accident, the state also requires you to have bodily liability coverage as well.
Limits
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No fault insurance covers medical expenses and lost income up to the limits of the policy. It doesn't pay above that and doesn't cover pain or emotional distress. If you want or need more than the policy pays, you'll have to file a claim against the other driver and his insurer and possibly sue them. All states allow this if your damages exceed a certain threshold, which could be the value of your policy, a set monetary level or a degree of serious injury.
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Negligence
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If you try to recover money from the other driver, your state's rules on fault and negligence will play a role. A few states have a blanket negligence standard that says you can't collect from the other driver if you contributed in any way to the accident. Other states apply a comparative negligence standard: If you're 30 percent at fault, you can sue for 70 percent of your losses. In some states, you can't sue if you have more than 50 percent responsibility.
Optional No Fault
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Pennsylvania and New Jersey have yet another system in place. In these states, taking out no fault insurance is optional, but cheaper than regular insurance. If you take out no fault, you give up the right to sue the other driver, but the state also immunizes you from lawsuits if you're at fault. Critics of the system say this gives bad drivers protection from being sued, even when they're to blame.
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