The term “no-fault insurance” is a bit of a misnomer and can be confusing. To many consumers, the term suggests that fault or blame is not assigned after a collision, and therefore, it doesn’t really matter who caused it. In reality, however, all it means is that all parties involved in a collision are paid by their own insurance companies, and time is not wasted on an investigation that determines fault before you can start repairs to your vehicle.
“No-fault insurance is a term that’s used in many provinces, including Alberta, Ontario, New Brunswick, Nova Scotia, Prince Edward Island, and Newfoundland and Labrador to describe direct compensation for property damage,” explains Gina McFetridge, VP of Atlantic Distribution for BrokerLink. “Years ago, and in some provinces even today, you deal with the company of the person who was at fault. But what most provinces have determined is that it’s faster and better to deal with your own insurance company, which is why they came up with no-fault insurance.”
In other words, no-fault insurance has nothing to do with who caused the accident or who is to blame. “It simply means that you deal with your own insurance company to repair the damage to your vehicle, while the other party that’s involved in the accident deals with their insurance company to fix their vehicle,” McFetridge adds.
The benefit to a no-fault insurance system is that you’re always dealing with the insurance company you chose – not someone else’s – to have your vehicle repaired. When you’re in a not-at-fault accident, you don’t need to fight with the other driver or their insurance company to get them to pay for the damage to your vehicle. Your insurance company works on your behalf for a covered loss.
If you live in a province where no-fault insurance is in place, you might assume that it therefore doesn’t really matter whether or not you cause a collision. Nothing could be further from the truth. “Fault is most definitely still assigned,” McFetridge stresses.
In some cases, she explains, it’s clear who caused the accident, and they’re assigned 100 per cent of the blame. In other cases, it could be a 50/50 scenario or some other ratio. “Each jurisdiction has guidelines to determine fault or degree of fault,” she adds.
For example, if you stop at a red light and someone smashes into you from behind, they’re 100 per cent at fault, while you get none of the blame. In other cases, however, fault can be shared. McFetridge offers the example of an accident that occurs when changing lanes or while pulling out of a parking spot in a parking lot.
In other cases, you might think that you’re 100 per cent to blame, but your insurance company might determine that you’re not to blame at all, or vice versa. “So if you hit a deer, for example,” McFetridge explains, “that is not considered to be your fault. However, if you slip on ice and wrap your vehicle around a tree, that could be considered your fault.”
Impact on Insurance Prices
Assigning fault is still important because it determines whether or not you will be assessed with higher insurance premiums at renewal. As a general rule, if you caused the accident or are deemed at least partially responsible for the accident, then your insurance rates are likely to go up unless the insurance coverage you purchased includes an “accident forgiveness” endorsement, which means that your very first at-fault accident is not held against you.
If you’re unsure whether your policy includes accident forgiveness, McFetridge recommends talking with your broker as soon as possible before a collision occurs. “Each insurance company does things in a slightly different way,” she explains. “Some may automatically include accident forgiveness when they quote you a price for your policy, but generally speaking, it’s priced separately.”
Without accident forgiveness, if you’re to blame for the accident, then you’ll likely see an increase in the cost of your insurance. How much of an increase really depends on a variety of factors. “It may impact your policy very little, or a lot,” McFetridge explains. “It all depends on how long you’ve been driving, your record, and the underwriting rules of the particular insurance company you’re with.”
Remember, no-fault insurance has nothing to do with who is to blame for an accident. Frankly, it’s just a confusing name for a system put in place by some provinces to simplify and expedite the claims process so that accident victims can get back on the road or get the medical help they need immediately, rather than waiting for blame to be assigned.