If you think having no-fault car insurance coverage means you’ll never be considered “at fault” for an accident, you’re not alone — that’s a pretty common misconception. But in the insurance world, no-fault means something a little different.
While the name might imply it’s about which driver is (or isn’t) at fault for an accident, the no-fault system is actually about how a car insurance claim is paid out. Under a no-fault insurance system, you deal with your own insurance company for all of your claimsopens a pop-up with definition of claims, regardless of whether or not you’re at fault for a collision. This system is in place in most Canadian provinces, including Ontario, Quebec, Alberta, British Columbia, Nova Scotia, New Brunswick, Newfoundland and Labrador, and PEI.
While there are several components to the no-fault system, the part that will likely affect you most is Direct Compensation Property Damageopens a pop-up with definition of Direct Compensation Property Damage (DCPD). Under a no-fault system, DCPD is the portion of your car insurance policy that covers damage to your vehicle to the extent that you’re not at fault for a collision. If you are at fault, damage to your vehicle will only be covered if you’ve bought all-perilsopens a pop-up with definition of all-perils or collisionopens a pop-up with definition of collision coverage. (Note: All-perils and collision coverage aren’t mandatory in most provinces, so talk to your broker to make sure your vehicle will be protected in an accident when you’re at fault.)
DCPD coverage is mandatory, except in Ontario and Alberta. If you opt-out of DCPD coverage, your insurer, anyone who may have caused the accident, or their insurer won’t compensate you for damages after a collision — even if you’re not at-fault. If you opt-out of DCPD coverage, you won’t receive coverage under the DCPD, Collision, or All perils section of your policy, including reimbursement for additional expenses like towing, storage, or a rental vehicle. While you may have a lower premium, you’ll have to pay out of pocket after a collision, so always discuss this option first with your licensed car insurance broker to learn about the risks.
It’s also important to note that DCPD doesn’t apply in British Columbia’s no-fault system. In British Columbia, Basic Vehicle Damage Coverage (BVDC) applies and includes a maximum coverage limit of $200,000 for vehicle-related damages.
Here’s a breakdown of who will pay claims for damage to your vehicle, depending on who’s at fault for the accident in a no-fault system:
- When you’re at fault, your insurer pays for damages to your vehicle under your own optional collision or all-perils coverage.
- When you’re not at fault, your insurer pays for damages to your vehicle under your DCPD coverage. In BC, your BVDC will pay for the repairs.
How does no-fault insurance work in real life?
Here is an example to show you how no-fault insurance coverage would typically respond in the event of a collision.
Let’s say Alex and Anna get into a collision in their home city of Ottawa, and Anna is determined to be at fault. Since Ontario operates under a no-fault system, it doesn’t matter who was responsible for the accident. Anna’s insurance company only has to pay out the claim to cover Anna’s vehicle damage, and Alex will deal with his own insurance company to claim damage to his vehicle. Anna will have to pay her collision deductible because she’s at fault, whereas Alex won’t pay unless he chose to have a deductible under the DCPD section of his policy.
So, under a no-fault system, if you are found to be at fault for an accident, your insureropens a pop-up with definition of insurer still wouldn’t have to pay for the damages to the other driver’s car.
How does no-fault insurance benefit me?
No-fault car insurance means lower administrative costs and a simplified claims process — so your claim can be resolved (and you’ll receive your payout) much faster. Plus, you only have to worry about making a claim with your own insurance company to receive your payout, and they’ll take care of the rest.
How will a DCPD claim affect my premium?
There are plenty of things that can have an impact on the cost of your car insurance — but if you’re involved in an accident and the other driver is found to be at fault, that incident won’t typically affect your premiumopens a pop-up with definition of premium.
If you’re wondering how your own policy might respond in the event of a collision, connect with your licensed car insurance broker. And while you’re at it, why not ask your broker if you qualify for any of these common car insurance discounts?
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