If you live in the United States, you either live in a no-fault or an at-fault state in terms of auto insurance. The difference between the two affects how you receive compensation from an auto insurance company. If you just moved from a state with a different requirement, then it's important to know the difference between the two types. Here is more information about no-fault and at-fault insurance policies and how they work.

What Is No-Fault Automobile Insurance?

The technical term for no-fault insurance is Personal Injury Protection insurance or PIP. With this insurance, each client settles their accident case with their own insurance company. No-fault insurance releases the burden of proving fault through a court case. You must carry a minimum liability amount determined by the state.

No-fault insurance pays for your vehicle's damage as well as your or your passenger's injuries. You could also be responsible for costs above your coverage limits. Some states may allow you to sue the other driver's insurance for any excess damages. However, your ability to file and recover with a lawsuit is limited.

What Is At-Fault Automobile Insurance?

More than half of the states follow an at-fault insurance system. In an at-fault system, the person considered most at fault for an accident pays the other person for damages. If you were not at fault, you do not have to pay or file a claim with your insurance company. In addition, you can sue the other driver for excess costs.

In these states, you must have a minimum amount of liability insurance. If your car has a lien, you may also need collision, comprehensive, and uninsured motorist coverage.

Which States Require No-Fault Automobile Insurance?

True no-fault states are much fewer than at-fault or mixed states. As of June 2021, only 10 states, such as Michigan and Hawaii, are true no-fault states. No-fault is the only insurance option there. Three states, Kentucky, New Jersey, and Pennsylvania are choice no-fault states. With these states, you can choose or reject to use the no-fault system. Ten other states, like Texas and Virginia, have no-fault laws but no limits on suing for excess damages. The other 27 states have at-fault laws.

Most states require automobile insurance, and many restrict the type of insurance you can purchase. If you move from one state to another, you will likely need a completely new policy. Even if you use the same insurance company, your new home state likely has different restrictions. If you need help finding a new insurance policy to meet your state's requirements, contact an auto insurance agent for more information.