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How No-Fault Insurance Affects Drivers -

July 26, 2013

There are a few provinces which have put together a no-fault insurance system. This is done with the goal of making the insurance claims process more straightforward for motorists. Even though this system can offer numerous benefits to the insured,  there could also be some confusion. But if you aren't sure about how no-fault insurance works, you should know that you're not the only one. The good thing is that no-fault insurance isn't as complicated as it may look at first. Once you find the right information about it, you will see that the no-fault concept is quite simple to understand.

It Still Matters Who Caused the Accident

Some people may believe that if you have no-fault insurance, you have complete impunity in case of an accident and that the insurance company will not bother to find out who was at fault in the accident. The reality is that even if you have no-fault insurance, the insurer can still determine that the accident was your fault. Any time an accident happens, insurers will always make an investigation to determine fault.

If your province has no-fault insurance, your own insurer will handle any claims you make and compensate you based on your policy for material damages and injuries. The insurance company of the other party will also take the same action. The person found to be responsible for the accident may experience higher insurance premiums when it comes time to renew their policy. Even if they shop around for insurance with other companies, they are likely to be quoted higher rates.

Every accident involves unique circumstances. In some cases, both parties may share some part of responsibility for it. Sometimes it will be 50/50, while in other cases the numbers may be different, such as one driver being found 75 per cent at fault and the other one 25 per cent. In these cases, both parties may expect to see their insurance premiums increase.

In the province of Ontario, fault determination rules are determined by the government. These regulations are accessible to the public and give guidelines for insurers to determine who was at fault in various accident scenarios.

Positive Aspects of No-Fault Insurance

Being under a no-fault system can be beneficial for insured parties in various ways. No-fault insurance makes filing your claim and getting paid by the insurer a lot simpler and faster, regardless of who was at fault. Under the tort system, an investigation would be completed by both insurers to determine who was at fault. Following this, the company of the driver found at fault would pay for any damage.

However, in some cases, this process doesn't proceed as smoothly as it should. There is the possibility of litigation if the insurers disagree on who is at fault in the accident or on the amount of money owed to the other party. No-fault insurance eliminates the possibility of a drawn out legal battle and will get you the funds needed to cover expenses associated with bodily injuries or repairs to your vehicle.

Another factor to consider is that the legal battles that are common under a tort system can be very costly for insurance companies. They will inevitably pass on these costs to their clients in the form of higher insurance premiums. In some provinces, you may still sue another driver for monetary losses or pain and suffering, while in others this is forbidden or severely restricted.

Negative Aspects of No-Fault Insurance

Very few people would try to deny the fact that no-fault insurance makes things easier for drivers involved in an accident, as the claims process is simplified. However, we must also consider the way it affects at-fault parties is different than under a tort system. Of course, being found responsible for causing an accident will cause a driver's insurance rates to go up. However, it will be the injured party's insurance company that will be paying them, as each insurer takes care of paying their own driver. This leaves some people to argue that a no-fault system is unfavorably biased towards bad drivers' insurers.

Furthermore, no-fault doesn't always eliminate costly lawsuits. Even though it was put forth as a way to reduce insurance premiums for drivers as it lowers the amount of money wasted on lawsuits, insurance rates in the past couple of years have been rising rather steadily. Due to the fact that every province can legislate over whether someone injured in an auto accident can sue the other party, legal battles are still a possibility in some provinces.

How No-Fault Insurance Works for Drivers

In summary, if you reside in a province that has no-fault insurance and make an insurance claim following an accident, the chances that your insurance company will settle the claim in a rapid manner are very high. You will also not be left waiting while the insurance companies engage in a protracted court battle over who was really responsible for the accident. In some provinces, you may have additional rights, such as the right to sue for pain and suffering, or financial loss, or both. But you will rapidly receive benefits up to the maximum amount set forth in your insurance policy.

Should you have been found to be completely or partly responsible for causing the accident, your insurance premiums will most likely increase when it comes time to renew your policy. While it is your right to appeal the results of a fault determination investigation if you disagree with it, keep in mind that in Ontario and Quebec strict guidelines are imposed on insurance companies to determine fault. In some provinces, the other party may sue you if their damages exceed the maximum amounts of their policy.

In case you are not at fault, your rates will not increase as a result of the accident. If the policy doesn't cover your full financial losses, some provinces allow you to sue the other party for the remaining amount.

In any case, remember that even under a no-fault system, one party will still be found at fault during an accident. Therefore, being a safe driver is always to your advantage.

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