No-Fault Insurance: What it Really Means to You

A man in the foreground calling his insurer after a collision with another driver who can be seen in the background calling her insurer too.

Several provinces have a no-fault insurance system designed to help streamline the claims process. If you’re unsure what no-fault really means and how it affects your insurance, you're not alone. Let’s go over how insurance companies and brokers handle accident claims.

No-Fault Doesn’t Mean No one is at Fault

A common misconception about no-fault insurance is that insurance companies won't determine who is at fault after an accident. However, this isn't the case. According to the Ontario Insurance Act, in every accident with multiple drivers, insurance companies must always assign a percentage of fault to each driver involved. Other provinces have similar laws.

No-fault insurance simply means your insurance company will handle your claim and pay your damages regardless of who is determined to be at fault for causing the collision. The other person’s insurance company will do the same.

Some provinces allow injured parties to sue an at-fault driver for pain and suffering, loss of enjoyment of life, and future healthcare costs. These lawsuits allow injured parties to recover losses from other parties outside the no-fault system.

Fault Determination Rules 

Each insurance company uses Fault Determination Rules to decide whether its customer is at fault for the resulting accident. These rules outline who is at fault in almost every imaginable accident scenario.

If you don't agree with your insurance company's determination, you can file a complaint with your insurance company and ask for reconsideration. If you're still unsatisfied, you can sue your insurance company in court.

How Fault Determination Affects Your Car Insurance Rates

If your insurance company determines you're to blame for the collision, you may have to pay part, or all, of the deductible to repair damages to your automobile. Your insurance company might also raise your premiums. Plus, the fault determination will go on your record so you may experience a potential rate increase at renewal or when shopping for car insurance quotes.

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The Benefits of No-Fault Insurance

Before no-fault insurance, the two insurance companies would battle it out to determine fault. Afterward, the company insuring the responsible driver would pay all the damages. This process could take a long time and leave the insured without reimbursement for an extended period of time. No-fault insurance helps people take care of car repairs and any medical bills quicker.

No-fault insurance generally cuts out the high cost of lengthy legal battles that use time and resources. By cutting out legal expenses, insurance companies can offer lower insurance rates.

The Drawbacks of No-Fault Insurance

Although no-fault insurance does make things simpler in the event of a claim, it can also leave a negative impression on the parties impacted. Although the party found at fault for the collision will face insurance rate increases, the injured party’s insurance will still have to pay out on the claim; rather than the at-fault party’s insurance company taking the full responsibility. Some people feel that the no-fault insurance system protects bad drivers while leaving good drivers without recourse when their property is damaged, or when they are injured.

What No-Fault Insurance Means to You

No-fault insurance has its pros and cons. In some cases, it can make the claims process simpler, but this varies from claim to claim and province to province. It’s important to be aware of the laws in your home province. Remember that no-fault insurance still means you can be found at fault, so drive safely and responsibly every time you get behind the wheel.

To keep your rates down always shop around for the best car insurance rates.