Ontario drivers will soon be able to reduce their auto insurance payments by opting out of certain coverage. However, experts warn the risk isn’t worth the potential rewards.
As of January 2024, motorists will have the option not to buy into direct compensation property damage (DCPD) coverage, which protects car owners from costs related to vehicle damage from a collision if they are not at fault.
This coverage also covers the loss of the vehicle or its contents.
While opting out will reduce the driver’s bill, it also means they will not be reimbursed for vehicle repairs, loss of a vehicle or its contents, or a replacement vehicle, among other items.
“If the described vehicle is damaged in a collision the loss will not be compensated even if you are not at fault,” the opt-out form warns. “You will not be compensated by this insurance policy, or by anyone else, including anyone at fault for causing the damage, or their insurance company.”
The provincial government says the change is meant to increase consumer choice and could be useful for drivers of older cars that are worth less than the insurance cost.
“This is an important change the government is making to give drivers more options,” a spokesperson for the Ministry of Finance said in a statement.
It’s unclear how much drivers can save on average by opting out of this coverage, however Morgan Roberts, director of RH Insurance, says it’s likely “not a significant savings.”
“You’re opting out of any coverage in the event of…a not-at-fault-accidents,” she told CTV News Toronto.
“So if you’re not at fault for an accident that happens, you’re not going to be reimbursed for [the] replacement value of the vehicle. No loss or damage. There won’t be any repair costs, towing costs, anything like that. You’re opting out of all of it.”
Roberts said she can’t envision a scenario in which opting out of DCPD would be beneficial, noting that the price of towing or vehicle repair would likely outweigh the hundreds of dollars that may be saved annually.
According to a May report by Ratesdotca, insurance premiums in Ontario have risen about 12 per cent in 2023 compared to 2021, averaging at about $1,766.
Premiums are particularly high in the GTA, with costs surpassing $2,000 in Vaughan, Richmond Hill, Mississauga, Toronto and Brampton.
MPP Tom Rakocevic, the Ontario NDP’s auto insurance critic, told CTV News Toronto Monday that if the province really wanted to reduce drivers’ bills, they would cap insurance rates.
“The regulator needs to step up and cap the amount of profits that they’re making off the backseat of drivers, who were being gouged and are paying the highest rates of anyone,” he said, stressing the answer is not to lower coverage for residents.
“Governments just simply don’t want to take on these insurance companies who are raking in record profits.”
The change is part of a wider multi-year strategy first announced in 2019, which, at the time, included electric proof of insurance, improvements in rate regulation, and enabling insurance companies to offer more discounts and options.
DCPD coverage is typically one part of a basic auto insurance policy, along with third-party liability, statutory accident benefits, and uninsured automobile coverage.
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