Auto Insurance

What You Need to Know About Mandatory Car Coverage in Ontario

By: Robb Engen on March 31, 2016

The term “no-fault” car insurance in Canada is a bit of a misnomer. It doesn’t mean a driver is blameless when it comes to a collision or accident. A no-fault insurance system simply means that if you are hurt or your vehicle gets damaged in a car accident, you work through your own insurance company to make a claim.

It doesn’t matter who was responsible for causing the accident. With no-fault insurance in Canada, victims of an accident don’t have to wait for two insurance companies to duke it out in court before deciding who to blame and how much to compensate.

Instead, claims are paid out immediately by the claimants’ own insurance company. That means each insurance company is responsible for its own clients’ claims. This saves motorists the trouble and cost of going to court and having to establish who was responsible, or mostly responsible, for the accident.

The insurance companies, police, and courts (if necessary) will still investigate who is at fault for the accident and the insurance company of the person ultimately found to be responsible will likely raise the premiums of the insured to help recoup the costs of the payout.

While all motorists must carry car insurance in Canada, each province establishes its own set of rules that varies across the country.

The no-fault insurance car insurance system in Canada was first adopted in Saskatchewan, followed by Quebec, Manitoba, Alberta, and British Columbia. In fact, no-fault exists in some form in every Canadian province. Where the provinces mostly differ is in the right to sue for damages and the payout threshold for pain and suffering.

In Alberta, for example, victims can sue for pain and suffering, but minor injuries are capped at $4,777. Ontario drivers, on the other hand, can sue for losses above their no-fault benefits, and victims can sue for pain and suffering if an injured person dies or sustains permanent serious impairment or disfigurement.

Manitoba and Quebec have completely adopted the no-fault insurance system and so victims in these two provinces cannot sue for pain and suffering, or financial losses. Instead, both the responsible and non-responsible parties receive basic pre-determined payouts with no ability to seek further damages in court.

The most unique adaptation of the no-fault insurance system in Canada is in Saskatchewan, where drivers can opt out of the no-fault Personal Injury Protection Plan (PIPP) and purchase a more expensive tort policy, which includes the right to sue.

Victims in Saskatchewan cannot sue for pain and suffering if a driver has PIPP, but can sue against tort policies with a large deductible of $2,500 against the award. Drivers can sue for losses above their no-fault benefits on either type of plan, however the default option under most Saskatchewan insurance plans is “no-fault” coverage.

Final thoughts on car insurance in Canada

The benefit of a no-fault insurance system is that victims can get compensated much sooner from their own insurance company after an accident rather than waiting for a court case to determine the cause of the accident.

Automobile accidents are a fact of life, especially in Canada when dealing with winter road conditions. A no-fault insurance system provides fair and quick compensation for injuries, property damage, and loss, avoids litigation and extensive claims for damages, and lowers insurance premiums for drivers.