Wed. Nov 29th, 2023
    Ontario Drivers Given Option to Opt Out of Auto Insurance Coverage, but Experts Warn of Risks

    Ontario drivers will soon have the choice to reduce their auto insurance payments by opting out of direct compensation property damage (DCPD) coverage, which reimburses vehicle owners for collision-related costs when they are not at fault. While this may result in lower insurance bills, experts caution that the potential rewards may not outweigh the risks.

    Beginning in January 2024, motorists will no longer be automatically enrolled in DCPD coverage, which also provides compensation for the loss of a vehicle or its contents. By opting out, drivers will forego reimbursement for vehicle repairs, replacement vehicles, and other items if their vehicle is damaged in a collision, regardless of fault.

    The provincial government defends this change as a means to increase consumer choice, particularly for owners of older vehicles with lower values. However, industry insiders, such as Morgan Roberts, director of RH Insurance, believe the savings from opting out will likely be minimal and may not justify the potential consequences.

    Opting out of DCPD coverage means forfeiting compensation for towing fees, repair costs, and the replacement value of the vehicle in the event of a not-at-fault accident. According to experts, the price of these potential expenses typically outweighs the amount saved annually by opting out.

    It remains unclear how much drivers stand to save by opting out of this coverage, but recent reports show that insurance premiums in Ontario have already risen by approximately 12% in 2023 compared to 2021, averaging around $1,766. This increase has made premiums particularly high in Greater Toronto Area (GTA) locations like Vaughan, Richmond Hill, Mississauga, Toronto, and Brampton, where costs have surpassed $2,000.

    While some critics argue that capping insurance rates would be a more effective solution to reduce drivers’ bills, the Ontario government claims its multi-year strategy, which includes more insurance options and discounts as well as improvements in rate regulation, will provide consumers with more choices.

    As the implementation date approaches, drivers must carefully evaluate the potential drawbacks and benefits of opting out of DCPD coverage, considering their specific circumstances and the value of their vehicles.

    Frequently Asked Questions

    What is direct compensation property damage (DCPD) coverage?

    DCPD coverage is a part of basic auto insurance in Ontario that provides reimbursement for vehicle damage, loss, and replacement costs from collisions, even when the policyholders are not at fault.

    What will happen if I choose to opt out of DCPD coverage?

    By opting out of DCPD coverage, you will no longer be eligible for compensation for vehicle repairs, towing expenses, the replacement value of your vehicle, or any other related costs in the event of a collision, even if you were not at fault.

    How much can I save by opting out of DCPD coverage?

    The exact amount of savings from opting out of DCPD coverage is currently unknown. However, experts suggest that the savings are likely to be minimal and may not outweigh the potential financial risks associated with foregoing this coverage.

    Are insurance premiums in Ontario increasing?

    Yes, recent reports indicate that insurance premiums in Ontario have risen by approximately 12% in 2023 compared to 2021, with an average annual premium of around $1,766. Costs are particularly high in GTA locations such as Vaughan, Richmond Hill, Mississauga, Toronto, and Brampton, where premiums surpass $2,000.