How does "no fault" car insurance work vs regular insurance?

Factual Questions
1

My question stems from the fact that my wife and I live in Texas and my daughter and her husband and kids live in Michigan. Texas requires a minimum liability insurance policy for cars/drivers registered in Texas. Our insurance exceeds the minimum required by the state and we also have “comprehensive” coverage to repair our own vehicles in an accident with an uninsured driver or if the car is stolen, vandalized, etc.

Michigan is a “no fault” state. My daughter has insurance on her vehicles as required by the state. However, as I understand it, if she is involved in a crash, her insurance fixes her car and the other driver’s insurance fixes his car. The person who caused the crash is irrelevant as far as liability and repairs are concerned.

But what happens if we drive our Texas-registered car in Michigan and we have a crash? Who pays for what? What if I, a properly licensed driver, drive one of my daughter’s vehicles (with permission) and am involved in a crash? I asked my insurance agent and he assured me that I am insured in all fifty states, but I don’t understand how this works in a no-fault context.

(I am a professional driver involved in interstate commerce, but my questions are only about personal travel in a non-commercial vehicle.)

2

My P&C license is lapsed by almost two decades now, so take the following as more as an educated layperson rather than a current expert, but at least I had a reciprocal license in both states.

So, first question, how does a no fault state work.

You’re mostly correct, in a no-fault state, losses are handled by your own carrier (caveats apply), with any damage to your car covered by Comprehensive (note, this is NON-collision claims such as theft, fire, vandalism, weather) or Collision coverage (impacts with anything other than animals).

Injuries to a person/passengers is covered by what is called PIP (Personal Injury Protection) which in Michigan (different no-fault states have different limits) of up to “unlimited” coverage, though lower levels are allowable depending on the purchaser’s choice (in my day, it was all “unlimited”).

In cases where the PIP is exceeded, or legal awards for Pain and suffering are allowed, then a claim can be made against the driver determined to be at-fault in a loss or their carrier.

Second question, how does it work if you’re out of state?

Well, in general, coverage follows the vehicle first, though there are a ton of exceptions (exclusions, other non-approved drivers, non-permissive use). And the states have an agreement that if you have coverage that meets the legal minimums in your “home” state, you are considered “compliant” with the requirement in any other US state, though your coverage could exceed or be lower than said state’s requirements.

So if you drove your Texas covered car to Michigan as a non-resident (there’s another exception) and were in an accident, your coverage would pay out per it’s Texas limits (so the person you hit would go under their presumed MI coverage, and if you exceeded their limits, they’d claim against your carrier), and you’d claim coverage under your med-pay coverage if any.

If you were instead driving one of your daughter’s cars as a permissive driver, it would pay out under THAT vehicle’s coverage, which would include the PIP coverage.

For the record, historically, Michigan was the “most true” no-fault state at the time I wrote policies, and the changes I noted above sure looks like it’s moving away from that, probably due to the ever-increasing costs of medical treatment.

3

Thank you for the detailed reply. That is a lot more than I got from my own insurance agent.

4

No problem - your agent likely has never sold insurance or had a P&C license for Michigan, and it’s a major outlier in terms of coverage. At my top, I had my Colorado license and 20 other reciprocal licenses, so it put me in a somewhat different position than a local agent.

But again, long time ago, and those licenses have all lapsed, and even then, there are a wide number of carrier or policy specific exclusions, so your exact circumstances could be different. Still, as long as both you and your daughter have decent coverage, you should expect to be taken care of in the circumstances laid out, minus much grumbling about whose coverage pays first, paying the various deductibles, and lots of the claims adjusters having to go back and forth over which is primary.

5

Mostly. A few decades ago, i lived in NJ and was rear-ended in Massachusetts. NJ was a liability state and MA was no fault.

My insurer paid for the damage to my car. (And ultimately was reimbursed by the other driver’s insurance, at which point they returned my deductible.) But i ended up paying out of pocket for my medical costs. Those were under a thousand dollars, and if they’d been large enough, some insurance company would have paid. (Honestly, i forget the details.) But the insurer of the guy who hit me said, “it’s no fault, go to your carrier”, and my carrier said, “it’s under your deductible, go suck eggs.”

6

Fwiw, that before i became a p&c actuary, and i knew nothing about auto insurance at the time. Possibly, if I’d known more, i could have fought that.