Blog No-Fault Insurance And How It Works In Ontario

Jun 14, 2021

What You Need To Know About No-Fault Insurance

Car accident in parking lot

The no-fault insurance system has been adopted in Ontario and many provinces across Canada to help simplify the claims process.

Let’s be clear about one thing, it does not mean you won’t be found at-fault if you are involved in an accident.

Since you deal solely with your insurer, the claims process is quicker, and you are paid out for losses almost immediately. There is also no need to go to court and sue the at-fault drivers for compensation, saving you time and the hassle of escalating court proceedings.

What Is No-Fault Insurance?

No-fault insurance (also known as the Ontario Motorist Protection Plan) is a system outlining how claims are handled by insurers and simplifies the claims process for drivers involved in a collision. No-fault means that, regardless of who is at-fault for an accident, each driver’s insurer will handle their claim.

Why Was No-Fault Introduced?

Prior to 1989, this system did not exist. It was introduced to offset the issue of growing liability costs - those making an insurance claim often had to place multiple claims from an accident. This caused issues with drivers, small municipalities and charities.

In September 1989, following extensive research and consultation, the government announced its intention to introduce it - no-fault insurance came into effect June 22, 1990.

A variety of reforms to the system have been introduced over the years to address new issues, such as insurance fraud.

Does Ontario Have No-Fault Insurance?

Ontario does have a no-fault system in place to help determine fault in the case of an automobile accident. If you are injured or your vehicle is damaged, you will deal directly with your provider regardless of who is at fault.

Is No-Fault Insurance Mandatory In Ontario?

No-fault insurance is built into all basic Ontario car insurance policies. If you are insured, you don’t need to speak to a provider to add it to your policy, it is added automatically.

How Does No-Fault Insurance Work?

The term applies to the process of how each person will handle their claim. Someone will always be fully or partially to blame, and it is the insurer’s responsibility to determine each person’s risk to determine how policies will be impacted.

This happens by each driver taking a percentage of the fault – known as Fault Determination Rules. Insurers will use these guidelines when examining a scenario by referencing the rules and fault to each party involved with the factual circumstances of the event.

Fault will not affect the eventual payout of the claim, if the policy will cover damage caused by the accident.

Common Misconceptions About No-Fault Insurance

Damaged rear bumper of a car on smartphone

Many Ontario drivers misunderstand what the term “no-fault” means and how it impacts their policy.

Misconception 1 : You will not be found to be at-fault if you are involved in an accident.

Misconception 2 : If no one is to blame for an accident your insurer will not determine who caused it.

Misconception 3 : After an accident, a no-fault accident will not go on your driving record.

These misconceptions are false. Despite the misleading name, insurers will always investigate a claim to determine who was responsible according to the Ontario Insurance Act. You may be found to be fully, partially, or share fault with the other driver.

As part of the no-fault system, your insurer will handle all aspects of the claim and reparations. They will :

  • Handle your claim : You only deal with your provider.
  • Pay out for damages to your vehicle : Your insurer will pay for all repairs to your vehicle.
  • Pay for medical bills : Your insurer will pay for some or all of your medical bills.

What Are The Benefits Of No-Fault Insurance?

The main reason why no-fault benefits drivers is that it simplifies and speeds up the process of submitting claims. Here are some of the other benefits of the no-fault system for Ontario drivers :

  • Compensation : All parties involved in an accident are entitled to compensation for damages and injuries.
  • Payment : Payouts happen immediately through your insurer.
  • Process : You deal directly with your insurance company for claims.
  • Claims : The claims process is quick. You don’t have to wait for a fault determination to be made in order to get compensation.
  • No court : No need to sue for compensation.
  • Limits : There are limits to the amount of compensation paid out to accident victims.
  • Rates : The at-fault driver will likely see an increase on their car insurance.

Despite the benefits to the system, some drivers oppose no-fault claiming that it protects hazardous drivers because the injured person’s insurer must pay for repairs even though their driver was not accountable.

What Is Covered Under No-Fault Insurance?

Driver making a phone call after an accident

Under the Ontario no-fault system, you will deal directly and be paid out by your insurer for all types of coverage claims, including :

  • Accident benefits : You receive health care and rehabilitation expenses post-accident.
  • Direct compensation property damage (DCPD) : Under DCPD, you receive compensation for damage to your vehicle and loss of contents.
  • Protection from uninsured drivers : You receive compensation when involved in an accident with an uninsured motorist.

Whether you are found to be at-fault or not for an accident, your insurer will pay out the claim. You deal directly with your provider for all accident claim payments.

How Does A No-Fault Claim Affect My Insurance?

If you are deemed to be at-fault, and you have collision coverage, you’ll have to pay the deductible to repair damage to your automobile before your provider pays. Your will likely see an increase, unless you have extra protection such as accident forgiveness. It will also stay on your driving record for up to six years.

If you are not at-fault, you will likely not see any increase on your policy cost from the claim.


No-Fault Insurance FAQs

No-fault insurance is meant to simplify the car insurance claims process and speed up paying compensation to drivers involved in accidents.

It depends on the circumstances of your auto accident. If you are the at-fault driver, you will likely be required to pay your car insurance deductible. Your deductible amount varies based on the details of your policy.
All drivers in Ontario, regardless of the insurer or policy are subject to the same no-fault rules.

Other than Ontario, there are four additional provinces that have a the system in place, including :

  • Quebec
  • Nova Scotia
  • New Brunswick
  • Prince Edward Island

Alberta uses a variation of the no-fault system. Drivers get compensation from their own insurers, but only moderate amounts. Other provinces in Canada have some form of no-fault, but how works varies by each province.

Here Are Some Other Articles You May Be Interested In

How Much Does It Cost To Own And Drive A Car?
Car Accident Reporting And What Do After You've Been In An Accident
A Guide To The Ontario Graduated Driver's Licensing System

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