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Insurance · Auto Insurance

What is 'no-fault' auto insurance (Personal Injury Protection / PIP)?

Correct answer

A system where each driver's own insurer pays for their injuries regardless of who caused the accident (PIP), intended to speed payment and reduce litigation — used in no-fault states

  1. A Insurance that never pays
  2. B A system where each driver's own insurer pays for their injuries regardless of who caused the accident (PIP), intended to speed payment and reduce litigation — used in no-fault states
  3. C Insurance only for the at-fault driver
  4. D Coverage for vehicle theft

Why this is the answer

NO-FAULT / PERSONAL INJURY PROTECTION (PIP): In no-fault states, each driver's OWN insurer pays for THEIR injuries (medical expenses, lost wages, etc.) REGARDLESS of who caused the accident. PURPOSE: Speeds payment of medical/injury costs; reduces litigation over fault for injury claims; PIP COVERS: Medical expenses, lost wages, essential services, sometimes funeral costs — for the insured and passengers, first-party; FAULT STILL MATTERS for: property damage; and serious injuries above a threshold (in no-fault states, you can sue the at-fault party only if injuries exceed a monetary or verbal threshold); NO-FAULT STATES: A number of states have no-fault systems (full or modified); others are 'tort' states where the at-fault driver's liability insurance pays the injured party; PIP vs MedPay: PIP is broader (includes lost wages, services); MedPay covers medical only; no-fault/PIP is an important auto insurance concept on the casualty exam — first-party injury coverage regardless of fault, used to speed payment and limit litigation in no-fault states.
Source: Casualty Insurance — Auto, No-Fault/PIP

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