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You’ve probably heard of no-fault states in the context of car insurance. But if you don’t live in one of the 13 states known to have that system, you probably think those rules don’t apply to you. Depending on which state you live in, you could be wrong about that.
The distinction between a no-fault state and an at-fault state is far from black and white. That’s especially true in the four states below that still have some tricky no-fault car insurance laws you need to know about.
If you don’t brush up on the rules, you could end up paying extra for insurance you don’t really need. To keep your coverage levels and premiums right where you want them, here’s what you need to know if you live in or are moving to what you thought was a straightforward at-fault state.
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What’s the difference between at-fault and no-fault car insurance?
At-fault (also called tort) states require the driver who caused the crash to pay for injuries and damages through their insurance. In these states, drivers typically file claims against the at-fault driver’s liability coverage and may sue for additional damages if needed.
No-fault states, on the other hand, require drivers to carry personal injury protection (PIP). After an accident, drivers file injury claims with their own insurance first, regardless of who caused the crash. Lawsuits are usually limited unless injuries meet certain thresholds.
Some states blur the lines between these systems by requiring insurers to offer or include PIP coverage even though they operate primarily as at-fault states.
States with an at-fault system but some tricky no-fault insurance laws
| Header Cell – Column 0 |
Minimum Personal Injury Protection (PIP) |
Notes |
|---|---|---|
|
Arkansas |
$5,000 |
PIP is included in your policy unless you opt-out. |
|
Maryland |
$2,500 |
PIP is included in your policy unless you opt-out. |
|
Oregon |
$15,000 |
PIP is mandatory even though Oregon is a tort state. |
|
Texas |
$2,500 |
PIP and Uninsured/Underinsured Motorist coverage are included in your policy unless you opt-out. |
Here’s how each state’s hybrid rules work in practice.
Arkansas
Arkansas has a tort (or at-fault) system, but still requires insurers to offer you personal injury protection coverage. That means when you’re shopping for car insurance, the quotes you see will include that coverage unless you actively opt out of it.
PIP can come in handy because it usually means a quicker payout than waiting for fault to be established before filing against the at-fault driver’s insurer.
However, note that PIP is primarily for medical expenses and lost wages. If you have good health insurance already, the medical expense side of that won’t necessarily be an issue. And as far as lost wages are concerned, it may not be worth filing a claim if you only miss a day or two of work. Workers with paid sick leave may not be eligible to claim lost wages at all.
If you do opt to keep the PIP coverage automatically included in your Arkansas car insurance policy, it’s probably worth bumping it up above that $5,000 minimum to really make the coverage worthwhile.
Maryland
Like Arkansas, Maryland is a tort state that doesn’t mandate drivers carry PIP, but does mandate insurance companies offer it. So, just like Arkansas, the coverage will automatically be included in any policy you buy in the state unless you opt out.
With a minimum coverage limit of just $2,500, this amount of PIP is less useful than the minimum in Arkansas. So, if you do want to keep the coverage, get quotes for higher coverage levels.
Remember that in a tort system like the one in Maryland, you have the right to sue the at-fault driver for your injuries, economic losses and your non-economic losses (pain and suffering).
That process will take longer than filing a PIP claim with your own insurer. But, if your PIP coverage is capped at $2,500, you might end up needing to go the lawsuit route anyway after an accident because that limit will be exhausted pretty quickly.
Another tricky thing about Maryland’s insurance laws is the way the uninsured motorist coverage works. Technically, the minimums listed above are the minimums you need to maintain. But, if you were to increase your liability insurance, companies are required to automatically increase the uninsured motorist coverage to match that.
You have to opt out of matching coverage by asking to lower the uninsured motorist coverage back down to the minimum.
Oregon
Oregon is an extra special case. It’s a tort state (meaning you reserve all your rights to sue the at-fault driver), but it also mandates a minimum level of PIP. You can’t opt out of it like you can in the other states on this list.
So, what does that mean for drivers in an accident? Basically, you have two options if you aren’t at fault. If you’re not at fault, you can choose not to use your PIP coverage and file a claim with the at-fault driver’s insurance for both bodily injuries and property damage.
Your second option, if you don’t want to wait for fault to be determined, is to file a PIP claim with your own insurance right away. Then, file a claim with the at-fault driver’s insurance afterward to recoup those costs. If there’s still damages leftover after exhausting both your PIP coverage and the other driver’s liability coverage, you can sue them for the rest.
Note that in Oregon, your insurance company can demand reimbursement on a PIP claim if the other driver’s insurance ends up paying you. The company can do the same if you win a settlement in court.
Texas
Texas’s car insurance laws operate a lot like Arkansas or Maryland. PIP isn’t mandatory but the minimum coverage listed above is automatically included unless you opt out. The same goes for the uninsured motorist coverage. You must reject both coverages in writing if you don’t want them included in your policy.
Otherwise, Texas is a tort state where drivers retain all rights to sue the at-fault party for injuries and damages.
If you haven’t compared auto insurance quotes recently, you could be paying more than necessary. Use the tool below to explore and compare some of today’s top auto insurance offers, powered by Bankrate:
The difference between no-fault and at-fault isn’t always clear
As the states above make clear, car insurance laws can vary widely and even broad distinctions aren’t as clear cut as you might think. No-fault states are widely misunderstood by drivers. And even fewer drivers are aware that you might still be facing some confusing no-fault laws in states that are supposed to have an at-fault system.
Whether you’ve been in the same state for years or you just moved, it’s worth taking the time to learn exactly how the laws work where you are so you can better understand your rights and requirements when it comes to buying car insurance and filing claims after an accident.
