What is no-fault car insurance?
No-fault insurance doesn’t actually mean that no one is at fault when you get into an accident. All it means is that if you’re injured or your car is damaged in an accident, your insurance company handles your claim, instead of potentially going through the lengthy and costly process of the court system and dealing with the other person’s insurance company. This is true regardless if the accident was your fault or someone else’s.
How does no-fault insurance work?
No-fault insurance really just refers to the process of how each person handles their claim. Despite the term "no fault", the reality is that someone is always either partially or fully at fault in an accident. After an accident, it’s an insurer’s responsibility to determine who’s at fault to evaluate an individual’s risk and determine how their premiums will be impacted. To determine fault, the law in almost every province requires an insurance company to assign a percentage of fault to each driver involved based on provincial regulations known typically as Fault Determination Rules. These rules outline different accident scenarios and assign fault to each of the parties involved in the accident by referencing the rule that most closely resembles the factual circumstances of the accident.1 Fault determination doesn’t affect the eventual payout of the claim. As long as the policy covers the damage caused by the accident, the claim will be paid. However, future premium adjustments may be based on this determination.
How does a no-fault claim affect my insurance?
In general, if you are deemed at fault by your insurance company, your insurance premiums will go up, unless you have a product such as Accident Forgiveness. With Accident Forgiveness, you’ll be protected from a rate increase on your car insurance for your first at-fault or partially at-fault accident (though it’s not a guarantee your premiums won’t increase at renewal for other reasons). If you are not at fault, although it may differ in each province, in general, your premiums should not go up as a result of your claim.
Do I have no-fault insurance?
This depends on the province you live in and assuming you have an active insurance policy within the province. Here are the provinces that currently have a pure no-fault insurance system:
- New Brunswick
- Prince Edward Island
If you reside in one of the provinces listed above, no-fault insurance will already be built into your standard insurance coverage. Let’s help put this in perspective. Let’s say you’re an Ontario resident with an active insurance policy. As you’re making your way to your destination, you accidentally miss a stop sign and lightly clip a passing car. As you take the appropriate steps after the accident, you start a claim and deal solely with your insurer throughout the fault determination and settlement process, as does the other party involved. Let’s assume in this example that we’re only dealing with vehicle damage and you are found to be 100% at-fault. If the other party also holds a car insurance policy in Ontario, their insurance policy’s Direct Compensation Property Damage (which is part of Ontario no-fault insurance) will cover their vehicle’s damage. But because you were determined 100% at fault, you’ll need to carry Collision or Upset coverage and you’ll need pay your agreed upon deductible first in order for your vehicle’s damages to be covered.
What are the benefits of no-fault insurance?
One of the main benefits of no-fault insurance is the amount of time it takes to resolve a claim. With no more back and forth between insurance companies trying to get to the bottom of who is to blame, it speeds the process up to pay for any automobile or medical bills.
This process not only saves time, but it also saves money. By going directly to your own insurance provider, it avoids the high costs associated with prosecuting an at-fault driver in a court system.
What are the legal implications with no-fault insurance?
No-fault insurance refers only to the insurance and claims settlement process. It is possible to be covered by no-fault insurance yet still be charged for a driving offence by the police.
Is DCPD the same as no-fault insurance?
DCPD stands for Direct Compensation Property Damage and is part of the no-fault system. It’s the portion of your car insurance policy that covers damage to your vehicle when you’re not at fault. DCPD is a term that is probably used more by an insurance advisor, but still important to know.
Interested in finding out more? Learn about how accidents impact car insurance rates or contact a TD Insurance licensed advisor today.
1. For example, for Ontario, please see: https://www.fsrao.ca/consumers/auto-insurance/protect-yourself/what-do-after-accident