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What Is No-Fault Insurance? What Ontario Drivers Need To Know

What Is No Fault Insurance in Ontario? | KBD Insurance
Curtis Killen

As president of KBD, Curtis aims to simplify insurance for his clients. He’s helped lead KBD to become one of Canada’s fastest 400 growing companies according to the Globe & Mail.

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So, what is no-fault insurance? Glad you asked. After all, simplifying insurance jargon is what we do best. In this post, we’re explaining the meaning of no-fault insurance, and how it applies to you as an insurance client.

So, what is no-fault insurance?

In super simple terms, no-fault insurance refers to how your insurance company processes your claim in the event of an accident.

Basically, no-fault insurance works like this: 👇

If you’re in an accident involving another driver, your claim will go through your insurance company, while the other driver’s insurance provider takes care of their claim.

We explain this insurance term in-depth below.

Jump ahead to get to the good stuff:

What is no-fault insurance?

Let’s get into it: What is no-fault insurance? 🤔

No-fault insurance is an auto insurance system designed to simplify the process of compensating accident victims in Ontario.

For example, in a traditional fault-based system, the driver who is found to be at fault for an accident is responsible for covering the costs of damages and injuries.

However, in a “no-fault insurance” system, each driver’s own insurance company pays for their medical expenses and other losses, regardless of who was technically at fault.

In a traditional fault-based system, determining fault can be a long process.

No-fault insurance streamlines things by shifting the responsibility of covering damages and injuries to each individual’s own insurance company, regardless of who caused the accident.

There are a few other benefits of a no-fault insurance system, including:

  • It provides quicker compensation
  • It reduces the need for litigation
  • It provides prompt medical treatment
  • It prevents disputes over fault

Despite the name, no-fault insurance does NOT mean:

  • That you will not be found responsible for the accident
  • That the responsible party won’t be charged by the police if there’s a law violation

Instead, it simply refers to the system where each party involved in an accident files a claim for damages with their own insurance provider.

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Why is the no-fault system used?

The no-fault insurance system was introduced in Ontario in 1990 to offset legal and admin costs and to simplify the pay out process.

Before this, the tort system was used, and accident victims had to sue for damages in the event of a collision.

This prolonged the pay out process, and accident victims had to front costs upfront while they waited.

Essentially, the no-fault system speeds up the process of filing claims so that the parties involved in an accident get paid out faster.

What does a no-fault accident mean in insurance?

A “no-fault accident” refers to an incident where each party involved in an accident is compensated for their losses by their own insurance company.

As we covered above, this is regardless of who is deemed responsible for the accident.

Remember: Under a no-fault insurance system, each driver involved in the accident is required to carry liability and accident benefits coverage as part of their auto insurance policy.

This coverage helps pay for medical expenses, lost wages, and other accident-related costs, regardless of who caused the accident.

So, even if you were responsible for the accident, your insurance company will still cover your medical expenses, and the other driver’s insurance company will cover their medical expenses.

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How does no-fault insurance work in Ontario?

When it comes to how no-fault insurance works in Ontario, the basic principle remains the same.

Each party involved in the accident is compensated by their own insurance company, regardless of who caused the collision.

So, let’s walk through the process of how no-fault insurance works if you experience a collision:

  • Step 1: Reporting the Accident: Promptly report the collision to your insurance company or broker. Provide them with the necessary details, including the location, time, and description of the accident.
  • Step 2: File A Claim: In Ontario, where a no-fault insurance system is followed, auto insurance coverage automatically includes liability and accident benefits. Accident benefits coverage helps pay for medical expenses, lost wages, and other accident-related costs. After the collision, you’ll be able to file a claim with your own insurance company to cover these expenses, regardless of who caused the accident.
  • Step 3: Claim Evaluation: Your insurance company will evaluate the claim based on the coverage limits outlined in your policy. They will review the medical bills, documentation of lost wages, and other relevant expenses to determine your compensation amount.
  • Step 4: Reimbursement and Repair Costs: If your vehicle was damaged in the collision, your insurance company may cover the repair costs based on the terms of your policy. Deductibles and coverage limits will apply.

So, to summarize: Each party involved in the accident will file a claim with their own insurance company for compensation.

The insurers will evaluate the claims and cover the medical expenses, lost wages, and other costs within the policy limits.

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How much will my insurance go up with a no-fault accident in Ontario?

In Ontario, no-fault accidents do not directly result in an increase in insurance premiums, as the concept of no-fault insurance means that each party’s own insurance company covers their expenses, regardless of fault.

However, here are a few scenarios where your premium may be affected:

  • Your Claims History: If you’ve had multiple claims within a specific timeframe, including accidents that you are and are not responsible for, it can impact your premium. Insurance companies view a high number of claims as an increased risk and adjust your rates accordingly.
  • Insurance Company Policies: Each insurance company has its own rating system and policies. They may consider factors beyond the accident itself when determining premium changes. It’s advisable to consult your insurance provider directly for accurate information on how they handle no-fault accidents.

To better understand how a specific incident may impact your insurance rates, reach out to an insurance broker like KBD, or your insurance provider.

We can provide personalized information based on your policy, driving history, and the circumstances surrounding the accident.

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Who pays for no-fault insurance in Ontario?

In Ontario, the drivers themselves are responsible for paying for no-fault insurance coverage.

Each driver is required by law to carry auto insurance, but the amount you pay for no-fault insurance in Ontario can vary based on factors including:

  • Your driving history and records
  • Your age
  • The type of vehicle you drive
  • Your location
  • The coverage limits you select

Insurance companies calculate premiums based on these factors to determine the appropriate amount of coverage and the associated costs.

It’s important to ensure that you’re properly covered as an Ontario driver, since failure to carry insurance can result in penalties, including fines and potential license suspension.

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So let’s go over the basics one last time. ✏️

What is no-fault insurance?

Unlike the name implies, no-fault insurance does not mean that there is no one at fault.

It’s simply a term that means that each driver’s insurance company handles their respective claims.

In short, no-fault insurance is a system that helps expedite the claim process so that those involved in the accident can be compensated more quickly.

It doesn’t mean that you’re not at fault in the accident – it just means that each party involved will work with their own insurer to cover expenses.

Make sense?

Good. 🤓

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