Does "no-fault" mean I'm not responsible for an accident?
Lion's Gate bridge in Vancouver

If you thought that “no-fault insurance” meant no one is at fault when there’s an accident, you wouldn’t be the only one to think that – it’s a pretty common misconception. 

No-fault insurance actually relates to how an insurance claim is paid out. In a no-fault insurance system, you’ll always deal with your own insurance company to report a claim, regardless of whether or not you’re at fault for a collision. This system is in place in certain provinces – namely, Ontario, Nova Scotia, New Brunswick, Alberta, Quebec, Newfoundland, and PEI. 

One part of no-fault insurance is Direct Compensation Property Damage (DCPD). DCPD is the portion of your insurance policy that covers the damage to your vehicle to the extent that you’re not at fault for a collision. You can be anywhere from 0-100% at fault for an accident (with the other driver(s) responsible for the rest of the 100%).

Heads up! As of January 1, 2024, Ontario auto insurance policyholders can opt out of Direct Compensation Property Damage (DCPD). DCPD was previously mandatory in Ontario. If you live in Ontario and choose to remove DCPD coverage from a vehicle, other coverages may be affected. Think carefully before removing it, and make sure you’re aware of what could happen if you don’t have it.

Here’s a quick summary of who pays for your vehicle damage:

  If you're "at-fault" If you're "not at-fault"
Traditional Coverage Your own insurer pays for damages to your vehicle under your Collision coverage. The other insurer pays for damages to your vehicle under the other driver's Liability coverage.
No-Fault System Your own insurer pays for damages to your vehicle under your Collision (or All Perils) coverage. Your own insurer pays for damages to your vehicle under your DCPD coverage.

Still confused? We’ve got a couple of scenarios to help explain how it works:

Scenario 1: Driver A and Driver B live in Vancouver and are involved in an accident. Since Driver A is found to be 100% at fault, his insurance company is responsible for paying out the claim for both his vehicle as well as the other driver’s. This would be considered a traditional insurance system.

Scenario 2: In Nova Scotia, there’s been a fender-bender between Driver C and Driver D – with Driver D being 100% at fault. Under the no-fault system, it doesn’t matter who was responsible for the accident.  Driver C will deal with her own insurance company to cover her vehicle damage – she will not have to pay a deductible (unless she has a deductible for DCPD). Driver D’s insurance company will pay out the claim to cover his vehicle damage, but only if he has Collision (or All Perils) coverage. Also, Driver D will have to pay his deductible because he was at fault.

So even though you could technically be responsible for an accident, under the no-fault system your insurer wouldn’t have to pay for the damages to the other driver’s vehicle. 

How does this benefit you? No-fault insurance reduces administrative costs and simplifies the process, meaning your claim gets resolved faster. Plus, you only have to worry about dealing with your own insurance company.

One more thing you should know: If you’re involved in a no-fault accident, where you’re found to be not at-fault, that particular incident won’t affect your insurance premium (your rate could still increase but it would be for other reasons).

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