No fault insurance

Let’s clear something up right off the bat: No-fault insurance does not mean that no one is at fault for a car accident or that you won’t be found at fault for a collision. Rather, it is the name given to many provincial car insurance systems, and all it means is that if you get into a car accident, your insurance provider deals with your claim instead of the other driver’s insurance company or the court system. Here’s how no-fault insurance works in Canada.

The history of no-fault insurance in Canada

The idea of no-fault insurance gained traction in Canada in the 1960s, influenced by similar discussions in the U.S. Before its introduction, Canada primarily operated under a fault-based (tort) insurance system, where injured parties had to sue the at-fault driver to receive compensation.

Here are some no-fault insurance system milestones for Canada:

• Manitoba became the first province to implement a no-fault system in 1971, introducing a hybrid model.
• Quebec adopted a pure no-fault model in 1978
• Ontario adopted a partial no-fault system in 1990
• Saskatchewan introduced a choice-based system in 1995, allowing drivers to select either a no-fault or a tort-based insurance model
• British Columbia introduced a full no-fault system in 2021

All other provinces and territories have built no-fault features (like statutory accident benefits) into their auto insurance systems, meaning drivers can turn to their own insurance company for certain benefits, no matter who caused the accident.

No-Fault vs Tort System: Which one benefits you more?

No-fault insurance is a system where each person involved in an accident goes through their own insurance company for compensation, eliminating the need to argue over who was at fault. The main difference is that in a full no-fault system, you generally can’t sue the other driver for injuries.

Compare that to the traditional fault-based system (also called a tort system), where you can sue the person responsible for your injuries. In legal terms, a "tort" is basically a civil wrongdoing—something that causes harm but isn’t a breach of contract. If you win a lawsuit in this system, the at-fault person (or more likely, their insurance company) has to pay for your damages.

In a fault-based insurance system, when you buy liability insurance, you’re covered for injuries or damages you cause to someone else, up to the limits of your policy. If you're the one injured, you’d typically sue the at-fault party, and their insurance would cover the costs up to their policy limit.

Alberta to switch in 2027

On November 21, 2024, Alberta’s government announced plans to switch to a no-fault auto insurance system starting January 1, 2027. But not everyone is on board. A 2024 survey from Fair Alberta Insurance Regulations (FAIR Alberta) found that only 25% of Albertans supported the change, while 63% preferred to stick with the current at-fault system. Many worry that no-fault insurance could limit their right to legal action and leave some accident victims feeling shortchanged.

Pros and cons of no-fault insurance

No-fault insurance was introduced in Canada as a way to streamline the claims process and reduce the burden on the legal system. And it did just that. A study by the National Library of Medicine looking at Saskatchewan and Manitoba’s switch from a tort system to no-fault insurance found a big drop in injury claims. In the five years after the change, Saskatchewan saw a 31% decrease, while Manitoba’s numbers fell by 43% per 100,000 residents.

However, even with its benefits, no-fault insurance still has some drawbacks for some. Below, we've broken down some of the pros and cons of no-fault insurance:

Pure vs. hybrid no-fault insurance systems in Canada

As we mentioned earlier, no-fault insurance isn’t the same across Canada—each province has its own way of handling it. Some have a pure no-fault system, meaning accident victims can’t sue for injuries and must rely entirely on their insurance benefits. Others use a hybrid approach, combining no-fault benefits with the option to sue in certain situations.

Pure no-fault insurance

Quebec and Manitoba follow a strict no-fault model. In these provinces, if you’re injured in a car accident, you can’t take legal action against the at-fault driver. Instead, you receive compensation through government-managed insurance programs. This system speeds up claims and reduces legal costs, but it can leave some victims feeling undercompensated.

Hybrid no-fault insurance

Other provinces, like Ontario and Saskatchewan, use a mix of no-fault and fault-based options. Ontario’s system allows accident victims to access benefits through their own insurance first, but if their injuries are serious enough, they can still sue the at-fault driver for additional damages. Saskatchewan even gives drivers a choice between full no-fault coverage and a tort-based system, where they retain the right to sue.

Common misconceptions about no-fault insurance

Many Canadian drivers get the wrong idea about no-fault insurance and how it actually works. The name can be misleading, making people think it changes how fault is assigned in an accident, but that’s not the case. Here are some common misconceptions:

• Myth #1: If you're in an accident, you won’t be found at fault.
• Myth #2: If no one is blamed, your insurer won’t investigate who caused the crash.
• Myth #3: A no-fault accident won’t show up on your driving record.

That's not how no-fault insurance works. Despite the name, no-fault insurance doesn’t mean no one is at fault. Insurance companies always investigate accidents to determine fault. In Ontario, for example, they follow the Ontario Insurance Act, which outlines fault determination rules. You can be found fully, partially, or even equally at fault with another driver.

The main purpose of no-fault insurance isn’t to eliminate fault. It’s to streamline claims and ensure you get compensation from your own insurer, rather than waiting for legal battles to play out. But if you’re found at fault (even partially), it can still affect your insurance rates and driving record.

How to choose the best car insurance policy under a no-fault system

Choosing car insurance under a no-fault system isn’t just about finding the lowest price. It’s about making sure you’re covered when you need it. Here’s what to keep in mind:

Get insurance coverage that actually protects you

Since no-fault insurance means you’ll be relying on your own auto insurance policy after an accident, it’s important to have enough coverage for medical bills, lost income, and other expenses. If you need long-term care, basic accident benefits coverage might not be enough. You may want to consider increasing your coverage limits or purchasing additional accident benefits.

Get extra protection with endorsements

Standard car insurance coverage varies depending on where in Canada you live. For example, if you live in Ontario, it comes with third-party liability coverage, accident benefits coverage, uninsured motorist coverage, and optional direct-compensation-property damage coverage.

A standard policy covers the basics, but add-ons or endorsements can provide more protection. You may want to consider adding options like collision coverage, comprehensive coverage, or accident forgiveness to your policy. Under a no-fault insurance system, you would still file insurance claims for these coverages through your own insurance company.

Get expert advice

Not all insurance policies are the same, so it’s worth shopping around. Companies like BrokerLink can help compare policies and find the best fit. If you’re unsure, talking to a BrokerLink insurance broker can help you make the right choice when it comes to what type of coverage you need.

Learn more about no-fault insurance with BrokerLink

Do you still have questions about a no-fault insurance system, such as whether fault can be shared in an accident or whether you should call your insurance after a minor car accident? Contact BrokerLink today.

No matter how you choose to get in touch, a BrokerLink insurance advisor will be happy to assist you. We also encourage you to take advantage of our free online quote tool that can provide you with a competitive quote in minutes.