What is no-fault insurance? Why do you need it?

No-fault replaces an at-fault, or tort-based, system. The dominant type of insurance in Canada before the no-fault system kicked in back in 1989, tort allowed drivers to sue over a smashed-up vehicle, damaged property or bodily harm stemming from a collision. With a no-fault car accident claim, your insurer doles out coverage, regardless of who is at fault. There’s no need to get your lawyers involved. 

How no-fault impacts the cost of car insurance

No-fault insurance benefits consumers by eliminating some of the costs involved in settling claim disputes. This, in turn, helps lower your premiums. 

The province of B.C. serves as an example of the savings that come from implementing a no-fault system. The Insurance Corporation of British Columbia (ICBC), which administers auto insurance in B.C, introduced no-fault insurance in May 2021. The province has held the position for having the most expensive auto insurance in Canada, but with the change to no-fault, B.C. drivers are expected to save 20% on average (or roughly $400 annually), on insurance premiums. 

A tort-based system still exists in Saskatchewan and Alberta. Saskatchewan is mostly a no-fault insurance province; however, drivers can choose to purchase auto insurance with the option of tort, allowing them to sue for “pain and suffering” and financial losses beyond what’s included in their no-fault benefits. Similarly, in Alberta, drivers can sue for financial losses that exceed what’s included in their no-fault coverage. 

What is not covered by no-fault insurance?

Despite the benefits, no-fault insurance policies do have their limitations. 

When your ride has been damaged by anything other than a collision—for example, a falling tree branch, theft or graffiti—you’ll need to have comprehensive coverage to be insured. Similarly, no-fault insurance doesn’t pitch in when you’re involved in a hit-and-run. This is when collision coverage works for you. Both types of coverage are optional and will cost you more in premiums, but they can save you from major and unexpected expenses down the road.

Is no-fault insurance mandatory?

In Canada, it is legally mandated that you have a certain amount of auto insurance before you can drive. And since no-fault coverage is included in basic auto insurance policies in most Canadian provinces, it’s fair to say that it, too, is mandatory. 

However, auto insurance rules vary from one province to another. For example, in Quebec, injury claims are processed through the province’s publicly-run insurance body, while car and property damage is managed by private insurers. Also, drivers in Alberta and Saskatchewan can still sue for damages in certain situations, even though no-fault insurance exists in those provinces. 

For reference, the Insurance Bureau of Canada (IBC) has compiled a guide that includes a cross-country snapshot of mandatory auto insurance coverages. 

How is fault determined after a crash?

While the ins and outs of no-fault insurance differ from one province to the next, the types of information used for fault-determination are pretty standard, no matter where you live. These include: police reports, files from insurance estimators and adjusters, and even past court decisions based on similar accidents. 

For insurance claims, it’s important to note that insurance companies determine fault, not the court systems nor the police. What comes into play are driving regulations and fault-determination rules for your province—there are detailed playbooks covering nearly every conceivable accident scenario. And it’s possible to be considered 50% or even 25% at fault—say, if both drivers committed errors that led to the crash. 

What you need to make a claim

There are go-to steps to take whenever you are in an accident, whether it’s your fault, someone else’s fault or a hit-and-run. We recommend you keep a copy of the IBC’s accident report form handy in your glove compartment. It contains important advice, such as: 

• When to call the police—specifically, when someone is hurt, it’s a deliberate hit, it’s a drunk-driving incident or when there’s substantial wreckage
• When to call for roadside assistance—hint: when you’re out of harm’s way.
• What information to note after the accident. Never admit you’re at fault or offer to pay for damages. Instead, if the driver didn’t make a getaway, exchange information (name, address, license plate, phone number, etc.).

What happens after you file a claim

Once you’ve filed a claim, a claims adjuster—an insurance agent tasked with evaluating a claim—will step in and review your file. They will either meet with you in person, or handle the claims process over the phone an/or email. They may ask you to fill out a proof of loss form, which is a sworn statement verifying your claim. It will require you to log all of the details surrounding the damage, the expected cost to repair or replace your car and, if applicable, its contents and your property as well. 

Remain patient after making a claim, because the process can take a while. The adjuster needs time to determine how much coverage you are entitled to based on your policy and who is at fault in an accident. Finally, don’t be afraid to ask questions, so you can clearly understand your rights and the benefits you are entitled to under your policy. 

More more on auto insurance: 

• Accident benefits have you covered—but for what, exactly?
• How much is insurance for a new driver?
• How much does it cost to insure an electric car?
• Best used cars in Canada for 2022