Starting January 1, 2024, Ontario drivers will have more flexibility when it comes to their auto insurance coverage. The Ontario government has amended the Insurance Act, allowing drivers to opt out of Direct Compensation—Property Damage (DCPD), which covers costs incurred in an accident with another vehicle that wasn’t the insured driver’s fault.
The opportunity to opt out was prompted by an Ontario government campaign launched in 2019 that aimed to offer drivers more auto insurance options and lower rates. The change may seem compelling, especially for cottagers with primary residences in the GTA where average auto insurance rates range from $2,000 to $3,000 per year, according to Rates.ca, but the savings from opting out may not be worth the risks.
“We won’t be recommending this to any of our clients,” says Cassie Gilroy, the retention manager at Mitch Insurance. “It could put you in a really poor financial position should something happen that is out of your control.”
A driver in a not-at-fault accident who’s opted out of DCPD loses coverage on the cost of damages to their vehicle, the cost of towing their vehicle, any of their vehicle’s contents, and they lose the right to sue the other driver for damages.
This means an accidental rear ending could leave drivers with a bill in the thousands. Cottagers, in particular, should be wary about towing costs, as the distance to local dealerships or repair shops tends to be farther away.
“Even people who have a third-party program that includes some towing, oftentimes, if you’re up in cottage country, that towing isn’t going to take you far enough to get your vehicle to where you want it to go. And then you end up paying per kilometre after that. Those towing charges can add up to several hundred dollars,” Gilroy says. “The towing fee alone could eat up your savings on what you’ve saved by opting out of the DCPD coverage.”
The amount drivers would save by opting out of DCPD depends on the type of vehicle they drive, the value of the vehicle, where they live, their driving record, and a variety of other factors. The average driver, Gilroy says, would likely save around $10 to $20 per month. The people who would see major savings, reaching into the thousands of dollars per year, are those who own new, high-end vehicles.
“Somebody who opts out of DCPD coverage also cannot have comprehensive or collision coverage on their policy,” she says. “So, they’re saying, ‘I have this brand new $90,000 vehicle that I’m not insuring any damage to at all.’ I really don’t see that being an option.”
Gilroy predicts that the drivers who might choose to opt out are those who can only afford to pay the bare minimum in insurance. “They’re also likely the same people who need the coverage the most following an accident,” she says. “I do think there may be some unfortunate circumstances or fallout from these changes.”
Rather than fully opting out of DCPD, Gilroy suggests that drivers looking to save consider paying a deductible. This means that if a driver’s in a not-at-fault accident, and they have a $500 deductible, they only have to pay the first $500 in damages. The insurance company covers the rest. And the higher a driver’s deductible is, the lower their insurance premium.
“It is something that’s not commonly used today,” Gilroy says. “But it has been available for a very long time. I think these changes are going to reignite those conversations, and people may start to choose to pay a higher deductible to save a little bit of money every month.”
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