Buying a new car is a big step. Once in your possession, the thought of it being stolen or having a total loss car accident is not on your mind. The reality is, most of us will have an involvement in some sort of motor vehicle accident in our lifetime. When an accident does happen, did you know that the most your insurance policy will pay for your car is its actual cash value at the time of damage? That makes sense for older cars, but how can you protect the value of your new car? In this article, we look at the OPCF 43 Waiver of Depreciation endorsement, and how it offers unique protection for newer vehicles.
How does a claim work?
Normally, if you have to file a claim in relation to a motor vehicle accident, your insurance company will look up the current day book value of your vehicle. They will then deduct the depreciation value from the book value.
The value of the loss or damage is based on actual cash value after taking into account depreciation. This means in the event of a claim; insurance pays the lower of the following:
- The cost to repair the loss or damage; or
- The ACV of the automobile at the time of damages
What is depreciation?
Car depreciation is the amount a car’s value decreases over time. There are several reasons you should understand depreciation and how much the car you’re buying is bound to depreciate. According to present rates of depreciation, up to 20% can be lost from the value of a new car within the first year of its purchase. However, barely 10% is lost annually from its value over the next four years of usage. This implies that as little as 40% of a car’s original purchase price is its worth after a period of five years.
What is the OPCF 43 & 43A?
Are there endorsements for new vehicles to help offset this? The “Waiver of Depreciation” or an “OPCF 43” changes how the insurance company values your vehicle. When you add an OPCF 43 to your policy, your insurance company will not deduct the depreciation of the vehicle for a set amount of time. The OPCF 43 usually applies for two to three years, depending on the insurance company. It is a coverage enhancement you can add to your auto policy at the time of purchase or lease of a new vehicle.
The Financial Services Commission of Ontario (FSCO) explains OPCF 43 like this:
“This coverage removes the insurer’s right to deduct depreciation from the value of your vehicle when settling a claim for loss or damage caused by a peril for which you are insured.”
There are two types of Depreciation Waivers:
- OPCF 43 – Option to add to new vehicles (whether financed or not)
- OPCF 43A – Option to add to new lease vehicles
This coverage is available to all new vehicles, leased or financed. It removes the insurance company’s right to deduct the depreciation value from your new vehicle in the event of an insured loss.
FYI: It is important to note that your insurance company has the right to choose to repair or replace your vehicle.
How does the OPCF 43 work?
With this endorsement, insurance will pay the lowest of:
- The actual purchase price, or
- Manufacturer’s suggested list price at the time of purchase, or
- The cost of replacing your car with a new car of the same make or model and similarly equipped
Other conditions include:
- You must be the original owner of the vehicle
- Tires, batteries, replacing parts for previous unrepaired damage are not included
- The loss/damage must occur before the policy expiry date
DYK: The OPCF 43/43a does not cover the depreciation of a repaired new vehicle. If your vehicle is in an accident and your insurance company repairs the vehicle, no coverage is available for the depreciation in value due to the vehicle’s involvement in an accident. This may affect resale or trade-in values.
Are there rules to get an OPCF 43?
Yes, every company has their own rules as to what requirements you need to qualify for an OPCF 43 endorsement. It is always best to check with your isure broker about your own insurance company, but the common rules are as follows:
- The vehicle needs to have less than 5,000 kms showing on the odometer
- The vehicle must be a new vehicle (not previously owned)
- You must have a bill of sale
- The vehicle cannot be a demo vehicle
To view the OPCF 43 endorsement, click here.
Why is the OPCF 43 worth the cost?
The OPCF 43 endorsement cost differs with different insurance companies. When you drive your brand-new vehicle off the dealer’s lot, it is immediately depreciating. If you get into an accident six months from the time you purchase the vehicle, you might not even get enough money back to pay off what you owe on it. Depending on the insurance company, you can get that OPCF 43 endorsement anywhere up to 12 months after you purchase the new vehicle. *Obvious restrictions apply if there’s no damage to the vehicle and other requirements have been met.
We always suggest that you apply the OPCF 43 before you pick up the vehicle because you never know what can happen on the road. Speak with one of our isure representatives if you are thinking of buying a new car. We can help you get the right coverage for your new vehicle!