3.1 Kentucky Auto Insurance Requirements

Kentucky operates as a "choice no-fault" state, giving drivers the option to choose between no-fault and traditional tort coverage. Understanding these requirements is essential for Kentucky P&C producers.

Kentucky's Choice No-Fault System

No-Fault Option (Default)

Under the no-fault system:

• Each driver's own insurer pays their medical expenses
• Covered regardless of who caused the accident
• Reduces need for litigation for minor accidents
• PIP coverage provides the benefits

Tort Option (Can Reject No-Fault)

Kentucky drivers can reject no-fault coverage:

• Must sign written rejection form
• Allows full lawsuit rights immediately
• Still required to carry liability insurance
• May be pursued by at-fault driver's insurer

Minimum Liability Requirements: 25/50/25

All Kentucky drivers must carry minimum liability coverage:

Understanding the Limits

25/50/25 Example:

• Maximum $25,000 for injuries to any one person
• Maximum $50,000 total for all injuries in one accident
• Maximum $25,000 for property damage per accident

Recommended Coverage Levels

Important: Minimum limits often prove inadequate in serious accidents. Average bodily injury claims now exceed $20,000, leaving little margin below the $25,000 per-person minimum.

Personal Injury Protection (PIP)

Mandatory Coverage (Unless Rejected)

Kentucky requires $10,000 basic PIP coverage:

PIP Benefits Explained

Medical Expenses:

• Hospital and doctor bills
• Surgery costs
• Prescription medications
• Physical therapy
• Medical equipment

Lost Wages:

• Up to $200 per week
• Maximum 52 weeks (one year)
• Total maximum $10,400
• Must be employed at time of accident

Replacement Services:

• Household tasks you cannot perform
• Childcare expenses
• Maximum $25 per day

Tort Threshold

Under no-fault, you can only sue for:

• Medical expenses exceeding $1,000, OR
• Permanent disfigurement, OR
• Permanent injury, OR
• Fracture to weight-bearing bone, OR
• Compound, comminuted, displaced, or compressed fracture, OR
• Loss of body member, OR
• Permanent limitation of use of body organ, OR
• Death

Uninsured/Underinsured Motorist Coverage

Mandatory Offer

Kentucky insurers must offer UM/UIM coverage:

• Equal to liability limits purchased
• Can be rejected in writing
• Protects against drivers with no/insufficient insurance

Uninsured Motorist (UM) Coverage

Covers you when at-fault driver has:

• No insurance
• Insurance company is insolvent
• Hit-and-run (phantom vehicle)

Underinsured Motorist (UIM) Coverage

Covers the gap when at-fault driver has:

• Insurance, but limits are insufficient
• Calculated as your limit minus their limit

Example:

• Your damages: $100,000
• At-fault driver's limit: $25,000
• Your UIM limit: $100,000
• UIM payment: $75,000 ($100,000 - $25,000)

Stacking

Kentucky allows stacking of UM/UIM coverage:

• Can stack coverage from multiple vehicles
• Increases available coverage
• Subject to policy terms

Exam Tip: Remember that Kentucky REQUIRES insurers to OFFER UM/UIM coverage equal to liability limits, but policyholders can reject it in writing.

The Motor Vehicle Reparations Act and Basic Reparation Benefits

Kentucky's no-fault system is the Motor Vehicle Reparations Act (MVRA). By registering a vehicle in Kentucky, an owner is deemed to have accepted the no-fault system unless a written rejection is filed. Accepting no-fault means the owner and covered persons receive Basic Reparation Benefits (BRB) of up to $10,000 per person for medical expenses, lost wages, and replacement services regardless of fault, and in exchange give up the right to sue in tort unless a threshold is met.

The exam tests the tort threshold: a person may sue for pain and suffering only if losses exceed $1,000 in medical expenses, or the injury involves a broken bone, permanent disfigurement, permanent injury, or death. A driver who formally rejects no-fault retains full tort rights but loses BRB protection — a trade-off the exam frames as a choice-of-system question.

Kentucky Compulsory Limits and Financial Responsibility

Kentucky requires every registered vehicle to carry minimum liability insurance, and the exam expects the figures: $25,000 per person and $50,000 per accident for bodily injury, plus $25,000 for property damage (commonly written as 25/50/25). As an alternative, an owner may post proof of financial responsibility, but liability insurance is the near-universal method.

The MVRA also requires PIP/BRB and makes uninsured (UM) and underinsured (UIM) motorist coverage available (UM must be offered and can be rejected in writing). Driving without the required coverage exposes the owner to fines, license and registration suspension, and reinstatement requirements. The exam tests the 25/50/25 minimums alongside the $10,000 BRB figure, so candidates must keep the liability limits and the no-fault benefit separate in memory.