How does no-fault insurance work in Canada?
No-fault insurance is the process by which each insurer handles a claim. Despite the term "no fault", the reality is that someone is almost always either partially or fully at fault when settling a property damage claim after an accident. It’s an insurer’s responsibility to determine fault, evaluate an individual’s risk, and determine how their premium could 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. In other words, as long as the policy covers the damage caused by the accident, the claim will be paid. However, your insurance premium could increase upon renewal if you’re found to be at fault for an accident.
Why is it called no-fault?
No-fault insurance doesn’t mean that no one's at fault when an accident occurs. It means that, if you’re injured or if your car is damaged in an accident, your insurance company will manage your claim – regardless of who is at fault.
What's the basic concept of no-fault insurance?
No-fault insurance is a way to help streamline the claims process because your claim is handled solely by your own insurer.
Do I have no-fault insurance?
That depends on where you live and whether you have an active insurance policy. The chart below provides a quick overview of how Direct Compensation Property Damage (DCPD) and no-fault insurance works.
| If you're at fault | If you're not at fault | |
|---|---|---|
| No-fault system (AB, NB, NFLD, NS ON, PEI) | Your insurance covers repairs to your car - provided you have collision coverage or all-perils coverage. | Your insurance provider pays to repair your car under DCPD coverage. |
| Standard coverage (BC, MB, SK, NWT, NU, YT) | Your insurance covers repairs to your car - provided you have collision coverage or all-perils coverage. | The other driver's insurance company will pay for repairs to your car. |
Live in Quebec? If you're found not-at-fault in an accident, the damage to your vehicle will be paid under the Civil Liability (Section A) Coverage of your policy. If you're found at-fault, your insurance company will cover the repair or replacement of your vehicle under your collision coverage, provided you have it on your policy.
But what if you're in an accident with an uninsured driver? Read Protection from Uninsured Drivers, to find out.
How does no-fault insurance work in Ontario?
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. You take the appropriate steps after the accident and start a claim.
Let’s assume in this example that we’re only dealing with vehicle damage, and you're found to be 100% at-fault. If the other party also holds a car insurance policy in Ontario, and has Direct Compensation Property Damage on their policy (which is part of no-fault insurance) their insurer will cover their vehicle’s damage. But because you were determined 100% at fault, you’ll need to carry All Perils, or Collision or Upset coverage –and you’ll need pay your agreed upon deductible– for your vehicle’s damages to be covered.
Do insurance rates go up after a no-fault accident?
If you're deemed not at fault, your premium generally won't increase as a result of your claim.
Conversely, if you hit a parked car, or are involved in an accident where you're deemed at fault by your insurance company, your insurance premium will typically increase. However, if you're a TD Insurance customer, your premium won't increase due to your first at-fault or partially at-fault accident if you have Accident Forgiveness as part of your policy – although that doesn't mean that your premium won’t increase at renewal for other reasons.
Is DCPD the same as no-fault insurance?
DCPD stands for Direct Compensation Property Damage and is part of the no-fault system. In certain provinces, it’s the portion of your car insurance policy that covers damage to your vehicle following an accident that isn't your fault. As in the example above, the other driver was found 0% at fault for the accident, so their DCPD coverage paid the cost to repair their vehicle. DCPD is an acronym that is generally used more by the insurance industry, but still important to know.
What happens if I remove my DCPD coverage? (Ontario only)
Beginning January 1, 2024, Ontario customers may choose to remove Direct Compensation Property Damage (DCPD) coverage from their car insurance policy. However, opting out of DCPD is not for everyone. Without DPCD, if you're involved in a collision with another vehicle in Ontario, you won't be insured for your loss – even if you aren't at-fault.
Why is no-fault insurance good?
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 to determine fault, it speeds up the process of paying out claims for any car or medical bills.
This not only saves time, but money too. By going directly to your own insurance provider, you avoid 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.
Interested in finding out more? Learn about how accidents impact car insurance rates or contact a TD Insurance licensed advisor today.
Source:
1. For example, for Ontario, please see: https://www.fsrao.ca/consumers/auto-insurance/protect-yourself/what-do-after-accident
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The content on this page is for general information purposes only and does not constitute legal advice. Coverages described herein may be subject to additional eligibility criteria, limitations and exclusions. In the event you make a claim, potential indemnification is also subject to the receivability of the claim and the type of coverage you bought.
In the case of conflict between the content on this page and your policy wordings, your policy wordings shall take precedence. Please speak to an Advisor or consult your policy wordings for further details.