What is no-fault insurance?
No-fault insurance describes a type of insurance system where drivers are compensated by their respective insurance companies. Drivers involved in an accident are required to file a claim for their own bodily injury and medical expenses, even if they're not the ones who caused the accident.
Negligent drivers are held accountable under a no-fault system. If you’re found to be responsible for causing an accident, the verdict goes on your record and your insurer will likely raise your premium.
No-fault insurance varies from province to province, so it’s important to be aware of the rules where you live. In provinces like Ontario, drivers have the right to sue another driver for loss of income, out-of-pocket expenses, pain and suffering, and more. But there are restrictions around who can sue and for how much. In other no-fault systems, drivers don’t have the right to sue at all (Quebec, for example).
The opposite of no-fault is full-tort. Under a tort system, you have to file a civil suit to get damages. The court determines if there is negligence (fault) and awards the appropriate judgement.
How does no-fault car insurance work?
In a pure no-fault system, your insurance company fixes your car and the other party’s insurance fixes theirs. Each person’s respective insurance company handles their claim.
The purpose of no-fault insurance is to reduce lawsuits, which can slow down the reimbursement process.
Using the no-fault insurance system doesn’t mean you can’t be found at fault for an accident. In the vast majority of collisions, all parties involved are found to be partially at fault, which means they share at least 50% of the blame with the other driver. Your insurer uses fault determination rules to decide who is responsible for an accident.
If you’re found at fault, the verdict goes on your record and your premiums could go up.
If you weren’t at fault, your rates will not increase (but if even they do, it won’t be as much as if you were at fault) and your insurance company will pay for your car’s damage.
Is no-fault insurance the same across all provinces?
Most provinces in Canada have a no-fault insurance regime up to a certain degree.
But each province handles no-fault insurance differently. Here’s a look at how no-fault insurance works in Ontario, Quebec, Manitoba and British Columbia.
How does no-fault insurance work in Ontario?
When you report an accident to your insurer, they’re required to use the Ontario government’s fault determination rules to figure out who caused the accident. These rules outline more than 40 common accident scenarios, using diagrams to depict almost every possible road collision situation. Each accident scenario has a corresponding liability percentage assigned to each driver.
The insurance company for each party investigates the circumstances of the accident and determines the degree of fault to be assigned to each driver. This determines which property damage coverages apply. All the insurance companies involved must agree on how fault has been assigned.
If you’re found more than 25% at-fault for the accident, it’s likely your premium will go up on renewal.
Ontario’s no-fault system covers damage to vehicles, injuries and even death. In more severe cases including negligence, impaired driving and drag racing, drivers can sue each other.
How does no-fault insurance work in Quebec?
No-fault insurance in Quebec is unique because the public insurance plan, Société de l’assurance automobile du Québec (SAAQ), only applies to bodily injury. SAAQ compensates anyone injured in a car accident in Quebec, whether you’re responsible for the accident or not.
Third-party liability insurance covers property damage and can be purchased from private insurance companies. If you’re at fault, damage to your vehicle will only be covered if your policy includes collision coverage, and you will have to pay the deductible. If you’re not at fault, damage to your vehicle will be covered and you won’t have to pay the deductible.
Under Quebec’s no-fault insurance system, you cannot sue the at-fault driver responsible for an accident—or their insurance company. However, at-fault drivers can face charges in the criminal system.
How does no-fault insurance work in Manitoba?
Manitoba operates under a pure no-fault system. Manitoba Public Insurance (MPI), pays for the accident benefit claims of those injured in collisions, regardless of who's at fault in the accident.
Mandatory third-party liability coverage protects an insured Manitoba driver in the event that someone is killed, injured or suffers property damage as a result of the driver’s negligence occurring in a collision.
Like Quebec, victims in Manitoba don’t have the right to sue for pain and suffering for financial loss in excess of no-fault benefits provided by MPI.
How does no-fault insurance work in British Columbia?
B.C. operates under a hybrid of the tort and no-fault systems. Under the current insurance system, drivers can take legal action against the at-fault party to recover damages. However, the accident benefits portion of the claim follows the no-fault structure. This means the injured person can receive coverage from their insurance policy (the basic plan required by law), regardless of who's at fault.
As of May 2021, the new system — called Enhanced Care Coverage — will see claimants deal directly with the Insurance Corporation of British Columbia (ICBC).
Drivers will receive compensation, benefits and medical treatment reimbursement directly from ICBC. This cuts out lawyers, legal costs and expensive judgements from the system. Like Ontario, certain cases involving dangerous drivers could still end up in court.
What should you do in case of an accident?
First, stay at the scene of the collision and call the police. Depending on the location and severity of the incident, police will either come to the scene or direct you to the nearest collision reporting centre to file a report and start insurance paperwork. Regardless of who is at fault, you should report any collision that involves injury or property damage to your insurance company within seven days.
Before moving your car, take photos of your vehicle to pass on to your insurer. You should also take note of details such as the date and time, weather and road conditions, how fast you were driving and the details of how the accident occured while your memory is fresh.
If your insurance provider determines you're responsible for an accident, you may have to pay part (or all) of the deductible to repair the damage to your car. Your insurance company might also raise your premiums.
The fault determination will go on your record, so you may experience a potential rate increase at renewal.
If you were at-fault for an accident because you were driving while impaired, your insurance company may sue you to recover the amount they paid you. With some policies, being drunk or high at the time of a collision voids your coverage.
Your questions about no-fault car insurance, answered.
What are the pros of no-fault auto insurance?
The system was designed to help make insurance more affordable and simplify the insurance claims process for car accidents. Other pros include:
- Lowered costs. Pure no-fault systems cut out the costs associated with taking at-fault drivers to court for damages.
- Less hassle. With no-fault insurance, you don’t have to chase the other driver or their insurance company for compensation.
- Faster processing. You deal directly with your insurance company for claims and insurance payouts happen immediately through your insurer. You also don’t have to wait for a fault determination to be made in order to get compensated.
- Accident benefits. All parties involved in an accident are entitled to compensation for injuries, even if you are entirely at fault for an accident.
What are the cons of no-fault auto insurance?
Some of the downsides of the no-fault system include:
- Limited right to sue. A pure no-fault system essentially takes away an individual's right to sue at-fault drivers if they are convicted of a criminal offence linked to the accident, such as impaired driving cases. There may also be limits to the amount of compensation paid out to accident victims.
- Perceived injustice. Some believe that no-fault insurance protects bad drivers, seeing as some provinces have banned legal action against negligent drivers. Another contested aspect of the no-fault regulatory system is the fact that the insurance company of the injured party still has to pay a claim, rather than the at-fault party’s insurance company taking full responsibility.
- Fraud. As everyone gets a payout regardless of fault, fraudulent auto insurance activity, such as staged collisions are a big concern — not just for insurance companies, but for drivers as well.
Which provinces offer no-fault insurance?
The following provinces have a no-fault insurance system in place: Ontario, Quebec, Manitoba, Alberta, Nova Scotia, Saskatchewan and Prince Edward Island.
British Columbia currently follows a tort system but is transitioning to a no-fault model by May 2021.
Manitoba and Quebec are the only provinces to operate under a pure no-fault system. That means drivers are never allowed to sue for pain and suffering or for financial losses.
Who pays the deductible with a no-fault insurance policy?
A deductible is the amount of money that you must pay out of pocket before your insurance company will pay your benefit.
Different rules apply depending on how fault is allocated.
If it’s determined you are 100% not at-fault, you do not have to pay the deductible.
If you’re found 100% at fault, you will have to pay your insurance policy’s deductible.
But more frequently, the fault is shared. If you are deemed 50% at fault, you are only responsible for paying 50% of your deductible.
If you’re the victim of a hit and run collision and you can’t identify the driver, you are responsible for paying for the damage — assuming you don’t have uninsured driver insurance, which will cover you in this instance.
If you are able to identify the driver, the Direct Compensation Property Damage portion of your insurance policy will likely cover the damage and won’t require you to pay a deductible.
Is no-fault insurance more expensive than other auto insurance policies?
It depends. In a full-tort regime, car insurance can be more expensive because you’re paying for legal costs, which can run high due to lengthy court battles.
This can also be true for provinces with hybrid systems that still allow you to sue the other party.
In Ontario for example, the Accident Benefits coverage is quite extensive and complicated. The extensive coverage brings additional cost, the complexity brings the lawyers back into play — and that is never cheap.
Do all insurance providers offer no-fault insurance quotes?
Insurance providers don’t provide quotes for no-fault insurance as it’s a system based on provincial regulations. The rules vary depending on which province you register your vehicle in. If you live in a province that operates under no-fault rules, it's automatically taken into account in the quotes you receive on LowestRates.ca.
