Written by Mark Lopez

No-Fault Insurance States: How Deductibles Work When Fault Does Not Matter

In case you live in a no-fault state, you could think that "no-fault" implies "no deductible". This is not correct. You need to know what the no-fault insurance deductible is about, since no-fault insurance applies exclusively to bodily injuries, not to auto repairs. You will still use your collision coverage and a standard deductible for your auto damage.

Twelve states use some form of no-fault auto insurance: Florida, Michigan, New York, New Jersey, Pennsylvania, Hawaii, Kansas, Kentucky, Massachusetts, Minnesota, North Dakota, and Utah. In these states, your own insurer pays your medical bills and lost wages regardless of who caused the crash, through Personal Injury Protection (PIP). The Insurance Information Institute's guide to understanding deductibles confirms that deductibles apply to most coverage types. A 2024 Federal Reserve survey found 37% of Americans couldn't cover a $400 emergency, so understanding which deductibles you'll actually pay after a no-fault accident is essential.

This article explains the no-fault insurance deductible, how deductibles work with PIP coverage, and the problems associated with no-fault insurance policies in Michigan.

Table of Contents

• No-Fault Insurance Deductible: Everything You Need to Know

• "Not At Fault" Does Not Mean "Not Deductible!" – False!

• What is a PIP Deductible?

• Why is No-Fault Insurance in Michigan the Trickiest?

• No-Fault States & Their Insurance Law

• 3 Tricks to Get Your Deductibles Lowered

• What Can PillowPays Do For You

• Conclusion

• FAQ

• References

No-Fault Insurance Deductible: What It Is

In the context of no-fault insurance, the injury claims will be covered by your insurance company without considering whether you or the other driver is at fault, via Personal Injury Protection (PIP). What is a no-fault insurance deductible? The basic concept here is that no-fault insurance applies only to injuries and medical claims, not to vehicle damage claims.

So after a no-fault accident, you may face two completely separate tracks:

• Injury track (PIP): your insurer pays your medical bills and lost wages regardless of fault. PIP may have its own deductible that you selected

• Vehicle track (collision): your car repairs are covered by your collision coverage, with your normal collision deductible ($500, $1,000, etc.).
  

This is why "no-fault" never means "no deductible." The term describes who pays your injury claim, not whether you have out-of-pocket costs. For a broader look at deductible strategies, see our guide to how deductible reimbursement works.

Meaning of No-Fault Insurance

This does not imply that there is no deductible. The term "no-fault" only implies that there is no need to prove that the other party is at fault to get compensated for the injuries incurred. This does not have anything to do with deductibles, which can apply to your PIP and collision insurance policies.

The common misconception that no-fault eliminates out-of-pocket costs leads many drivers to under-budget for an accident. Even in a pure no-fault state, you could pay a PIP deductible plus a collision deductible after a single crash.

"The biggest misunderstanding about no-fault insurance is the word 'no,'" says Linda Park, Certified Financial Planner at Horizon Wealth Advisors. "Clients hear no-fault and assume no cost. The reality is you still have a collision deductible for your car, and you may have chosen a PIP deductible to lower your premium. Both come due after an accident."

How PIP Deductibles Work

A PIP deductible no-fault is an amount you agree to pay out of pocket on your Personal Injury Protection claim before your insurer covers the rest. Choosing a PIP deductible lowers your premium, but it means you pay more out of pocket if you're injured. PIP deductibles are optional in most no-fault states and vary by state and insurer.

Here's how the trade-off works:

Higher PIP deductible: lower monthly premium, but more out of pocket if you file an injury claim

Lower or zero PIP deductible: higher monthly premium, but little to no out-of-pocket cost on injury claims

PIP coverage itself is broader than most drivers realise. Depending on the state, it can cover medical expenses, a portion of lost wages, replacement services for household tasks you can't perform while injured, and, in some cases, funeral costs. The deductible you select applies to these benefits. For more on auto deductible strategies, see our guide to auto deductible reimbursement by insurer.

Michigan No-Fault: The Most Complex Example

Michigan has the most complex no-fault system in the country. The Michigan no-fault deductible structure involves three collision coverage options, a unique mini-tort recovery mechanism, and multiple PIP coverage levels created by the state's 2019 reforms. PIP makes up roughly 35% of the average Michigan auto premium.

Three Collision Coverage Options

Because PIP doesn't cover vehicle repairs and property damage claims against another Michigan driver are limited, collision coverage is especially important. Michigan offers three types:

• Limited collision: covers your repairs only if you're 50% or less at fault

• Standard collision: covers your repairs regardless of fault (you pay your deductible)

• Broad form collision: covers your repairs regardless of fault AND waives your deductible if you're less than 50% at fault

Mini-Tort Rule

You can initiate a "mini-tort" lawsuit to be reimbursed for a part of the collision deductible of the car insurance from the at-fault driver for a maximum amount of $3,000. This type of claim is specific only to the state of Michigan and is designed to help cover your collision deductible expenses if you were hit by another person.

Levels of PIP Medical Coverage Post-Reform 2019

Michigan's post-reform 2019 law allows you to choose your own PIP medical coverage level rather than providing unlimited coverage for all state residents. You can choose between unlimited, $500,000, $250,000, $50,000 (available for Medicaid-covered drivers only) or no coverage (available only for drivers having qualified health coverage or Medicare parts A & B). Qualified health coverage should have a yearly deductible not exceeding $6,000. The maximum monthly work loss benefit until September 30, 2026, will be equal to $7,201

Michigan also has Property Protection Insurance (PPI), which pays up to $1 million for damage your car causes to others' property, such as buildings and fences. PPI covers damage to a legally parked vehicle you hit, but not damage to moving cars. For more on homeowners' deductible strategies, see our guide to homeowners' deductible reimbursement.

"Michigan is in a category of its own," says Robert Delgado, Independent Insurance Agent and member of the National Association of Insurance and Financial Advisors (NAIFA). "Between the three collision options, the mini-tort recovery, and the PIP level choices, two Michigan drivers can have wildly different out-of-pocket exposure after the same accident. The broad form collision option is the only one that actually waives your deductible, and many drivers don't know it exists."

The Twelve No-Fault States and Their Regulations

Twelve states use no-fault or no-fault-style systems, but the rules vary significantly. Some are "pure" no-fault, while others give drivers a choice between no-fault and traditional tort coverage.

In every one of these states, the no-fault rules apply to injury claims through PIP. Vehicle damage is handled separately through collision coverage with your standard deductible. Always check your specific state's PIP minimums, deductible options, and lawsuit thresholds. For more strategies, visit the deductible protection strategies.

Three Tips to Manage Your No-Fault Deductibles

Tip 1: Understand Both Your PIP and Collision Deductibles

Pull out your auto policy and find two separate deductibles: your PIP deductible (if you selected one) and your collision deductible. Many drivers don't realise they chose a PIP deductible to lower their premium. Knowing both numbers tells you your true out-of-pocket exposure after an injury accident. The Insurance Information Institute's guide to lowering insurance costs explains how deductible choices affect your premium across coverage types.

Tip 2: In Michigan, Consider Broad Form Collision

If you live in Michigan, a broad form collision is the only option that waives your deductible when you're less than 50% at fault. The premium difference may be worth it if you want to avoid paying a collision deductible in a not-at-fault accident. Also, explore the mini-tort process to recover up to $3,000 of your deductible from the at-fault driver. Carefully compare the three collision types before renewing.

Tip 3: Layer a Reimbursement Plan for Your Collision Deductible

No-fault rules don't touch your collision deductible, which is where most of your out-of-pocket vehicle cost sits. A deductible reimbursement plan reimburses your collision deductible in days after a valid claim, up to your plan limit, regardless of fault or which no-fault state you live in. It works alongside your PIP coverage to cover the vehicle repair gap. For more on auto coverage, visit more deductible protection strategies.

Key Points 

• With no-fault insurance, your insurance provider settles your injury claim (using PIP) irrespective of who is at fault in the case. It is NOT the same as no deductible. The vehicle damage will be covered under your collision coverage, subject to the deductible.

• In one no-fault accident, you may need to pay two deductibles: a mandatory PIP deductible (that reduces the premium) and a collision deductible for damages to the car.

• The following twelve states use a no-fault system: FL, MI, NY, NJ, PA, HI, KS, KY, MA, MN, ND, and UT. There are pure no-fault states and those that give you the option of either choosing no-fault or tort coverage.

• The state of Michigan has the most complicated no-fault insurance system: three types of collision (limited, standard, and broad form), a mini-tort for recovering up to $3,000 of your deductible, and different levels of PIP coverage due to 2019 reforms. Under broad-form collision coverage, there will be a deductible waiver when your percentage of fault is below 50%.

FAQs

Is it not true that since we are talking about no-fault insurance, it implies that there is no deductible?

No. In fact, no-fault insurance only means that no matter what happened and who was responsible for the accident, your claim for injuries will be paid. Nevertheless, the damage to your vehicle will be paid out of your collision coverage and your regular deductible, as well as your PIP deductible.

What is PIP? What is the PIP deductible?

A Personal Injury Protection (PIP) policy is the backbone of no-fault insurance. This policy covers all the medical expenses and wage losses, no matter whether you were responsible for the accident or not. You can choose your PIP deductible, which lowers your premium but increases the amount you must pay upfront if something happens to you.

Why is Michigan no-fault insurance so complicated?

Michigan offers three collision coverage types (limited, standard, and broad form), allows a mini-tort claim to recover up to $3,000 of your deductible from the at-fault driver, and lets drivers choose from multiple PIP coverage levels after the 2019 reforms. PIP makes up about 35% of the average Michigan auto premium.

Does my collision deductible change in a no-fault state?

No. Your collision deductible works the same way in a no-fault state as anywhere else. You pay it when your car is repaired under collision coverage. No-fault rules apply only to injury claims through PIP, not to vehicle damage claims.

Which states have no-fault auto insurance coverage?

There are 12 states with no-fault auto insurance coverage: Florida, Michigan, New York, New Jersey, Pennsylvania, Hawaii, Kansas, Kentucky, Massachusetts, Minnesota, North Dakota, and Utah. Some states offer pure no-fault insurance, while others, like New Jersey, Pennsylvania, and Kentucky, allow one to choose between tort and no-fault insurance policies.

Disclaimer

The information provided in this essay is not related to insurance, financial, or legal information about a no-fault insurance policy.

Sources and References

• Insurance Information Institute (III). (2025). Understanding Your Insurance Deductibles. 

• Federal Reserve Board. (2025). Economic Well-Being of U.S. Households in 2024.

• Insurance Information Institute (III). (2025). 12 Ways to Lower Your Insurance Costs. 

• American Family Insurance. (2026). Auto Deductible in a Not-at-Fault Accident. 

• J.D. Power. (2025). U.S. Auto Claims Satisfaction Study.