How no-fault insurance works in Canada
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What is no-fault insurance?
No-fault auto insurance doesn't mean you're not at-fault, just that you'll only deal with your own insurer. In formal terms, no-fault insurance is when a reimbursement from any loss as a result of an insured risk is paid for by your insurer, not someone else’s. It makes the claims process faster and delivers more funds to the injured, without administrative slow downs and rising costs of the courts.
Before the no-fault system, there was the tort insurance system where the driver deemed at fault in a crash was completely liable and the other driver (i.e. victim) had an opportunity to sue for damages to their car, medical care, and even replacement income.
How auto insurance companies determine fault
A no-fault system means you will only deal with your own insurance company, but it doesn’t mean you can’t be found at-fault. After a collision, all associated insurance companies look to the fault determination rules to determine who was at fault, or partially so. Any driver in an accident can be found from zero to 100 percent at fault depending on how the crash happened.
Even though the police conduct their own investigation, the insurance company's investigation will trump the police when it comes to fault determination for insurance purposes. So remember when submitting a claim just because the police deemed you to not be at fault, your insurer may see things another way. They may determine that you were partially to blame and only reimburse you for a portion of your claim.
What should you do when you're in an accident?
If you’re in a collision, make sure to get the following details and file it with your insurance provider as soon as you can (ideally, within a week of the accident). Failure to do so may result in your claim being denied. When you submit a claim, the more details the better.
At the scene, don’t admit to any fault, stay calm, and stick to the facts. If it’s a major accident, call 911 and don’t move injured people unless they are in danger. Once everyone is safe and away from traffic, here is the essential information you need after an accident:
- The date and time of the accident
- The location of the accident
- Make and model of each vehicle involved
- License plate numbers of those vehicles
- Each driver’s name and driver’s license number (it’s possible a driver isn’t the owner)
- Name of all the insurance companies and policies of each driver
- Take note of any immediate injuries from the collision
- How many passengers were involved, not just the drivers
- Take photos of the damage done to each vehicle
- Write down, or record on your phone how you would personally describe what happened that caused the accident
- Once police show, make sure to get the officer’s name and badge number
For more details, read our blog, "What to do after a car accident".
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How a no-fault car insurance system works
In Canada, there are both public and private insurance systems. It is federally mandated that everyone driving needs car insurance. The difference between the two systems is, with public insurance the provincial government offers the standard product, while private allows for competition from various insurance companies. In a private system, a driver is free to shop around for the best car insurance quote.
Unfortunately, despite the disparity, neither system can consistently claim to be cheaper than the other. There is a lot of debate ongoing for which province has the most expensive car insurance rates in the country - it is consistently in flux between Alberta, British Columbia and Ontario, but as of early 2023 it was recently shown that Alberta auto insurance rates are the most expensive.
Be it private or public, the core elements of the insurance policies remain the same. And, each policy can be modified with add-ons or extensions to the base policy. At the core, insurance policies include:
The main components of auto insurance
| Basic car insurance | Overview |
|---|---|
| Third-party liability |
Insurance against the risk of damaging someone else’s property and injuring another person. |
| Accident benefits |
If you're in an accident, this pays you for medical costs, rehabilitation, income replacement, and death and funeral expenses. |
| Uninsured motorist |
Coverage for when you’re in an accident where the other driver is at fault, but they have no insurance coverage. |
| Direct compensation property damage (DCPD) |
In provinces where it exists, this is coverage for your vehicle and its contents if you’re not at fault. Available with car insurance in Ontario, Quebec, Nova Scotia, New Brunswick, and PEI. |
The most common endorsements (add-ons) to auto insurance
| Add-ons | Overview |
|---|---|
| Collision insurance |
Protects your car if you’re in an at-fault collision with another car or stationary object like a tree or guard rail. |
| Comprehensive insurance |
Protects your car from perils not related to driving like vandalism, extreme weather, fire, or falling objects. |
Those are the four core coverages that make up a standard auto insurance policy, but many drivers add additional coverage, if not already included, such as collision, comprehensive car insurance.
You can further customize your policy by extending coverage limits, like increasing third-party liability up to $2 million instead of the minimum, which is usually $200,000. You can also add-on specialized coverages like accident forgiveness, conviction protector, and disappearing deductible.
How no-fault insurance works by province
While no-fault insurance is used in every province and territory, how it works will vary slightly. In Saskatchewan no-fault is the default, but a driver can opt for tort insurance instead - significantly reducing their insurance premium and potential claim amounts. Quebec’s hybrid no fault system means you’ll have to deal with the public insurance system for any accident benefits claims, but you must go through a private insurer to protect your car from collision and comprehensive damages.
There are also a lot of provincial differences when it comes to accident benefits payout amounts for medical, loss of income, or death benefits. In some provinces, if you are unhappy with the payout amount you are awarded, you can sometimes sue for more, but there are limits. With this in mind, we decided to give an overview of the limits and allowances for pain and suffering in each province.
No-fault insurance Ontario
No-fault insurance BC
No-fault insurance Alberta
No-fault insurance Saskatchewan
No-fault insurance Manitoba
No-fault insurance Quebec
No-fault insurance New Brunswick
No-fault insurance Nova Scotia
No-fault insurance Prince Edward Island
No-fault insurance Newfoundland and Labrador
No-fault insurance Yukon
No-fault insurance Northwest Territories and Nunavut
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Frequently asked no-fault insurance questions
Does a no-fault accident increase insurance rates?
If you are found to be zero percent at fault, it should not impact your rates. If the fault is shared between both drivers, being found greater than 50% at fault has been shown to increase insurance premiums.
Which provinces have no-fault insurance in Canada?
All provinces have a form of no-fault insurance, but each one has varying degrees of claim payouts. In Saskatchewan, you can opt for a tort system instead. BC will have no-fault in May of 2021. Alberta is still debating its merits.
When did no-fault insurance start in Ontario?
No-fault insurance in Ontario started in 1989 in an attempt to combat the rising costs associated with the tort system.
What are the downsides of no-fault insurance?
No-fault makes things much easier for all parties for managing claims and payouts. The downsides of a no-fault system could be the limited compensation for pain and suffering, though there is some and most of your medical care is covered through accident benefits. Opponents argue that it protects bad drivers because they can't be sued (they can, but limited) for overages beyond your existing coverage.