No-Fault Auto Insurance in Canada – How Does it Work?

Quebec is one of the provinces with no-fault car insurance laws. This means that in the event of a car accident, residents of Quebec will be paid out by their own insurance companies – instead of the other driver’s insurance company. No-fault insurance works this way no matter who is at-fault in the incident that has caused loss.

Another part of the no-fault system is that you are restricted from seeking recovery through the Canadian justice system for financial losses caused by others. In many places around the world, suing the other party for damages is extremely common and a no-fault system helps avoid some of this expensive litigation.

In Ontario you are able to take someone to court for economic loss as well as pain and suffering but there will be conditions. Albertans are able to sue for economic loss and pain and suffering but there are limits on the amount they can be rewarded.

Lowering the Cost of Car Insurance Premiums

No-fault insurance was originally introduced to lower premium costs across the board. It was also supposed to speed up the payment for injuries to drivers in Quebec. In some cases it has been fairly effective.

Critics of No-Fault Car Insurance

Critics of no-fault coverage say that these laws aren’t punishing Canada’s worst drivers: those people that are causing a large portion of the automobile accidents. Detractors say that legal settlements and larger jury awards will lower the instances of reckless driving in Canada.

There will be negligent drivers no matter what insurance laws we have but critics feel that no-fault insurance is not the answer. They say that it can even be difficult to see payouts for legitimate claims under the no-fault system. And they point to the fact that some provinces in Canada, like Quebec, with no-fault insurance also have some of the highest insurance premiums. And lower premiums are one of the main reasons why some people say that no-fault insurance is better. It may be that the financial accessibility of insurance in no-fault provinces makes it more attractive, which could increase the number of people being insured, specifically in areas with higher risk of vehicle accidents.

Supporters of No-Fault Insurance

Supporters of no-fault insurance say that liability coverage will still protect bad drivers from the risk of the financial loss that would come from litigation. This means that in many ways a bad driver won’t be thoroughly punished even in an at-fault insurance system. One thing that supporters of no-fault insurance often say is that uninsured drivers often aren’t able to pay their damages regardless. This means that the fear of litigation likely doesn’t play into the decisions of poor drivers across the country. Under an at-fault insurance system, the risk of bad driving is likely not on their radar and if it was then they couldn’t afford to pay for the damages they have caused. Or at least that is the argument.

There are pros and cons to both types of insurance law, which is why some provinces in Canada have chosen no-fault while others prefer at-fault insurance. There are even provinces with a hybrid model, which takes parts from both.