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Ontario drivers can now opt out of direct compensation property damage (DCPD) coverage as a result of changes to insurance rules effective at the beginning of 2024.

If drivers choose to go without the coverage, they will not be reimbursed for vehicle repairs, loss of a vehicle or its contents, or a replacement vehicle and more.

DCPD coverage protects vehicle owners from costs related to vehicle damage from a collision if they are not at fault.

Experts have warned that by opting out drivers will be on the hook for vehicle repairs or the loss of a vehicle.

Ontario’s insurance regulator, the Financial Services Regulatory Authority (FSRA), said on its website it worked with the insurance industry on the changes.

The Insurance Bureau of Canada (IBC) told Canadian Underwriter it has created a working group of industry representatives who are preparing educational materials to be shared with consumers and stakeholders on the benefits, risk and impact of choosing not to be covered for DCPD.

Prior to dropping the coverage, IBC advises consumers to consult with their insurance broker to fully understand the implications of their decision.

Basically, in exchange for a premium discount, what is known as an OPCF 49 form gives the policyholder’s consent for the insurance company to not compensate them for any physical damage to their car if it’s involved in a collision. The OPCF form states:

“WARNING – By signing this form, you agree you cannot claim Direct Compensation Property Damage and Collision or Upset Coverage: If the described vehicle is damaged in a collision the loss will not be compensated even if you are not at fault. 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.

“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; or
• loss or damage to any one of the vehicle’s contents.

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.”

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.”

The DCPD option is one of several ways the Ontario government planned to provide more choice for consumers in its 2022 budget. Other proposed measures include more access to usage-based insurance (UBI) programs, a pledge to crack down on insurance fraud, and re-examining how postal codes are used to determine premiums.

-With files from Canadian Underwriter

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