Ontario’s insurance regulator has passed OPCF 49, which now gives consumers the choice to opt out of Direct Compensation Property Damage (DCPD) coverage on auto policies. Although it may seem like there can be thousands of dollars in savings on the horizon, it’s important to understand what it may really end up costing you in the long run.
What exactly is DCPD coverage?
Direct Compensation Property Damage is when your insurer pays for your vehicle (property) repairs after a collision. In the provinces with a no-fault insurance system, DCPD is one part of a basic auto insurance policy. It works in conjunction with other mandatory coverages, such as:
It offers coverage in the event that you are in a not-at-fault accident. DCPD has been a mainstay in Ontario auto insurance coverage. However, The Financial Services Regulatory Authority of Ontario (FSRA) announced that the Ontario Policy Change Form (OPCF) 49 will now allow drivers to opt out of DCPD coverage. This means that Ontario drivers will soon have a new option when it comes to claiming coverage in a collision: The option to claim no damages at all.
6 things to know about DCPD
DCPD better aligns insurance premiums with the costs for repairs of a vehicle. This means that owners of less expensive vehicles to repair will pay less for their insurance. Similarly, owners of more expensive vehicles that are costly to repair may pay more – meaning a fairer system for everyone:
- If you have a not at-fault collision, you can arrange vehicle repairs with your own insurance company, not someone else’s.
- DCPD does not impact your right to sue for other damages, like injuries.
- If you are not at-fault for a collision, DCPD covers your vehicle damages, loss of use and any contents that are damaged. You still need to purchase collision coverage to have repairs completed when you are at-fault.
- Vehicle owners choose their insurance provider, which means you decide which company handles the vehicle repair process.
- DCPD regulation provides transparency when determining fault for a collision.
- Ensures a more efficient process for vehicle repairs, since you don’t have to wait for someone else’s insurance company to start the process.
When can I access DCPD coverage?
In order for you to access DCPD coverage in Ontario, there are four criteria that must be met:
- Not at-fault: You must not be at-fault for the accident. At-Fault Accident Determination Rules under the Insurance Act are important to assess who is responsible for the collision.
- Vehicle involvement: One or more vehicles must have involvement in the accident.
- Insured: The vehicles in the accident must be identifiable and legally insured in Ontario.
- Location: The accident must happen within Ontario.
Is DCPD the same as Collision Coverage?
No. It is different from collision coverage. As an optional add-on endorsement to your policy, collision covers you for damages arising in at-fault collisions. DCPD, on the other hand, entitles you to recover damages (less your deductible) from your insurance company. The stipulation is that you are not at-fault. The collision must happen in Ontario and the other driver must be insured in Ontario.
What does the OPCF 49 endorsement do?
In short, what this endorsement or ‘add-on policy change’ means is that in the event of a collision where you are at-fault, you can choose not to be compensated for costs related to the accident.
The OPCF 49 form states: “Not being compensated means you will not be reimbursed for any loss or damage to the described automobile, including”:
- Repair costs
- The value of the vehicle
- The loss of use of the vehicle
- A replacement for the vehicle
- Loss or damage to any one of the vehicle’s contents
To download the OPCF 49 form, please click here.
If you lease or finance the vehicle, you should not sign this form without consulting with the lease or financing company because you may be personally responsible for its loss or damage.
Important to note: After you opt out of DCPD coverage, you may choose to reinstate it back into your policy. You will be required to pay the difference in premium later. Unless you reinstate DCPD, your insurance company has no obligation to help you with any damages in the case of a not-at-fault collision. Under OPCF 49, you also agree not to claim reimbursement from other parties involved in the accident. This will include the driver found at-fault for the collision in the first place. In a nutshell, all policies sold in Ontario must include DCPD, which covers your car if you’re not at-fault. As of January 2023, this will no longer be the case.
Reasons to opt out of DCPD coverage
The ability to opt out of DCPD was introduced as a measure to give drivers more flexibility in their coverage. This can also help keep your auto insurance rates low. Ontario’s insurance regulator, FSRA, indicates on its website it worked with the province’s property and casualty industry to come up with a way for consumers to opt out of DCPD coverage:
- Reduce premiums: Since DCPD is still managed by your insurance company, you can potentially save 5-10% of your total annual premium if you opt out of this coverage. It depends on the market and company, according to Daniel Ivans, RATESDOTCA insurance expert.
- Owners of older vehicles: While it may sound like an ideal way to cut your monthly costs, this endorsement only benefits drivers that own vehicles that carry little-to-no value.
- You can afford the accident: It is also beneficial to those drivers that will not be impacted financially by any loss or damage to their vehicle if they have to pay out-of-pocket for repairs.
Insurance Bureau of Canada says the DCPD changes will enable customers to “manage their own premiums and to exercise choice for insurance products tailored to their unique needs”.
Should you opt out of DCPD?
The Ontario government’s plans in its 2022 budget aims to provide more choice for consumers. Other proposed measures include:
- More access to Usage-Based Insurance (UBI) programs.
- A pledge to crack down on insurance fraud.
- Re-examining how postal codes are used to determine premiums. That can impact you in many different and expensive ways.
The downside to opting out of DCPD with OPCF 49
While it may provide more choices, it also puts a heavier burden on you, the driver, if an accident does happen. The form states “Even though you are not at-fault, your insurance will not cover this or help you with the loss.” Here are some cons to the OPCF 49 endorsement:
- You must arrange for your own repairs and rental vehicle, all at your own effort and expense.
- Lengthened vehicle repair times. This is due to supply chain issues dating back to last year and the global semiconductor chip shortage. What might have been once a relatively quick repair job has now turned into weeks, or months-long, waits. Loss-of-use coverage (OPCF 20) is an optional add-on for most policies, and often have a standard cap of $1,500. The driver is then left to handle car rental fees on their own.
- Car rental fees: Last August, CBC reported rental prices of over $2,000 a month for a basic sedan, and short-term fees of over $120 per day, with no foreseeable relief anytime soon.
- Can’t afford to be in an accident: For lower-income families, the cost to pay for repair or replacement costs of their vehicle may be too great. In the event of an accident, the savings gained on their insurance premiums with OPCF 49 may come back to hurt them if they find themselves in an accident – ultimately being a more financially-detrimental situation.
Final thoughts on whether to opt out of DCPD coverage
With OPCF 49, the Ontario government is allowing Ontario residents to opt out of paying for damages to their own vehicle if found at-fault. Unlike removing your collision coverage, the OPCF 49 endorsement, in essence, puts a heavier burden on you to repair or replace your vehicle, find alternate transportation and deal with not only the repair shop, but the rental agency, as well. The OPCF 49 endorsement should only be an option if you are financially stable enough to replace your vehicle for the amount you might save.
If you are looking for savings on your monthly auto premiums, we have several resources to help you find savings. A deal is only a deal if you come out better on the other side of it. For many, to opt out of DCPD coverage may result in the opposite occurring. When you need advice about the most suitable coverage for you and your vehicle, our isure representatives will work hard to lay out all the options so that you can make an informed choice about which coverages to drop and which ones to keep.
