Personal Injury Myths & Misconceptions: If I File a Lawsuit, My Insurance Premiums Will Go Up

The latest edition in our series on personal injury myths and misconceptions addresses a concern that’s common among people involved in car accidents.

Many times, people are reluctant to make a claim or initiate legal action against the insurer because they are afraid their premiums will increase. People are also sometimes worried that if they fight their insurer, their coverage will be cut off. Is that true?

Fact: Increases in premiums are almost always related to how much at fault you were for the collision. Your premiums may go up if you make a claim–particularly if you’re determined to have been at fault for the accident–but not always.

As for whether your insurer will drop you if you sue them, that is unlikely. Once you’ve had your policy for 60 days, insurers only have the right to cancel your policy in certain circumstances. Those include if the insured has broken the law or become too high risk (e.g., impaired or dangerous driving), has been dishonest within the application or claims process, or is not paying their premiums. (See the OAP 1: Ontario Automobile Policy Owner’s Policy for more details.)

In Ontario, we have no-fault auto insurance. This doesn’t mean that no one was at fault for an accident. It means that regardless of who was responsible for the collision, each party makes a claim through their own auto insurer (rather than pursuing the other party’s insurer for compensation). It also means that you’re entitled to Statutory Accident Benefits to recover from your injuries–even if you were at fault.

In fact, insurers are required by law to make a determination on who was at fault in a collision, and to what degree. The insurer and the police may make different findings on fault. This “fault determination” is calculated as a percentage, in 25% increments. The higher your degree of fault, the higher the deductible you’ll pay, and the more likely it is that your premiums will go up. If you’re deemed 25% at fault or less, your premiums may not go up.

So, fault does play a role in whether your premiums go up following a claim, but it’s not the only factor. Other factors include the amount of the claim, your previous driving record, and whether you’ve made claims recently.

The best case scenario is that it was a minor accident, you’ve been determined not at fault, and had a good driving record. This is especially the case if it’s the first time you’ve been in a collision.

One last important point: even if your collision is minor and you decide not to pursue a claim, please remember that you must report all accidents to your insurance broker, agent or insurance company  within 7 days. Failing to report a collision to your insurer can put your policy into jeopardy. Collisions where anyone is injured–even minimally–must be reported to police.