Date Published: 2023/12/11

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Should you opt out of Direct Compensation Property Damage coverage?

Car accident

Soon, Ontario drivers will have a new option to restrict coverage in the event of a collision—the option not to claim damages.

In December 2022, the Financial Services Regulatory Authority of Ontario (FSRA) announced that Ontario Policy Change Form (OPCF) 49 will give drivers the choice to opt out of Direct Compensation Property Damage (DCPD) coverage.

Now, that’s a lot of acronyms! Essentially, what that means is that in the event of a collision where you aren’t at fault, you can choose not to be compensated for costs, including:

  • The cost to repair or replace your vehicle
  • The loss of use of the vehicle (e.g. a rental vehicle or taxi services while your vehicle is inoperable)
  • Loss or damage to the vehicle’s contents
  • Towing and storage fees

OPCF 49, formally known as the Agreement Not to Recover Loss or Damage from an Automobile Collision, was introduced “to enable innovation and choice,” as stated in the provincial announcement.1

Under OPCF 49, you can agree not to be compensated by your insurance company or anyone else, including anyone at fault for causing the damage or their insurance company. But what does that mean?

What is Direct Compensation Property Damage?

DCPD coverage falls under Ontario's Insurance Act, passed in 1990. All Ontario drivers are covered under this mandatory coverage for their benefit. If you're involved in a not-at-fault or partially-at-fault collision, DCPD ensures that you will be compensated by your insurer.

However, DCPD coverage requires that one or more vehicles were involved in the collision, the vehicle (and its contents) that suffers damage is insured in Ontario, and at least one other vehicle involved in the collision is insured in Ontario.

Different from DCPD coverage, Collision coverage is an optional add-on that provides protection in the event that you're involved in an at-fault collision.

Why would someone opt out of DCPD?

As previously mentioned, the ability to opt out of DCPD (or opt into the OPCF 49) was introduced to provide drivers with coverage flexibility and cost savings. If you opt out of this coverage, you could save on your annual premium, but the savings is minimal. Be that as it may, there are not many candidates and scenarios to which this option is recommended. So, while it may be tempting for Ontarians desperate to save money on their auto policy to sign away their DCPD coverage, the financial risks outweigh any short-term cost savings.

Should you opt out of DCPD?

OPCF 49 states that “Even though you are not at fault, your insurance will not cover this or help you with the loss. You must arrange for your repairs and rental vehicle, all at your own effort and expense.”

If you opt out of this coverage, you agree not to recover loss or damage, meaning you’re on the hook without any recourse if you’re in an accident. Especially if you lease or finance your vehicle, you shouldn’t sign the form without consulting your lease or financing company as most contracts require physical damage coverage to be in place.

Extended vehicle repair times may also considerably impact the loss of use of your vehicle. Since global supply chains are trying to recover from the COVID-19 pandemic, repairs that might have taken a few days to complete are still taking double the time.

For those reasons and peace of mind, it’s best to keep your DCPD coverage as it is.

What it’s all about

By signing the OPCF 49, you cannot claim DCPD, Collision, or Upset coverage. You may reinstate this protection at any time and pay the premium adjustment, but until then, your insurance won’t cover the damage or help you with the loss. It's noteworthy that in the event of a collision, you cannot reinstate your protection to cover pre-existing damage.

Effective January 1, 2024, insurers will be required to offer consumers the OPCF 49. However, rather than signing away this vital coverage, there are alternative saving opportunities that your insurance representative can help you explore, like changing your deductible, bundling your policies, or installing a telematics device.

If you’re shopping for auto insurance and would like a quote, reach out to an Orbit broker at 877-976-7248. If you’re an Orbit customer and you have questions about your insurance coverage, call 877-976-7248 to review your policy or learn more about your coverage options.

1. Financial Services Regulatory Authority of Ontario – FSRA releases three new Guidance