My brother-in-law works in insurance. At a family dinner, we were jokingly complaining about insurance rates when he said Ontario’s going to make car insurance cheaper by letting people opt out of coverage that would compensate them for damage to their own car even if somebody else hits them. He didn’t know much more. Is this true? Would it mean that I wouldn’t be covered if somebody totalled my car? Could I sue them? That sure doesn’t seem worth it. – Tim, Kitchener, Ont.
An upcoming option on Ontario car insurance policies to decline coverage for damage to your vehicle when you’re not at fault might save you a few bucks a month, but it could cost you tens of thousands if somebody hits you, an insurance broker said.
“If you get into an accident where you’re not at fault, you are covering your own vehicle and you cannot go after the driver,” said Morgan Roberts, director of RH Insurance, a Toronto-based online insurance brokerage. “So if somebody hit you from behind, something that you couldn’t control, insurance will not cover the loss at all. You would have to arrange and pay for your own repairs and rental vehicle.”
The provincial government recently amended the Insurance Act to allow policyholders to sign a form declining to recover damages to their vehicle in the event of an accident. The idea, the government said, was to give consumers “more choice” and potentially lower their monthly car insurance premiums. When the change takes effect on Jan. 1, 2024, signing Ontario Policy Change Form 49 will allow you to opt out of direct compensation property damage (DCPD) coverage, also known as no-fault insurance.
Right now, all policies sold in Ontario must include DCPD, which covers your car if you’re not at fault.
If somebody hits you now, you can go to your own insurance company and they will pay to either fix the damage or replace your car or give you a payment based on what the car is worth today, which you can then put toward another vehicle.
Coverage for damage to your car if you are at fault in a collision is not automatically included in policies. It’s an additional option you have to buy.
If you sign OPCF 49 to save money on insurance, it would remove that no-fault insurance coverage from your car – and you couldn’t sue the driver or the owner of the other vehicle.
Your insurance policy would still include accident benefits coverage, if you were injured, and at least $200,000 in third-party liability coverage, which protects you from lawsuits if you cause a crash and somebody is injured or killed or their property is damaged.
No coverage?
The form – titled “Agreement not to recover for loss or damage from an automobile collision” – contains a detailed warning:
“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
• 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.”
Roberts said that means exactly what it says: If somebody hits you and they’re at fault, you’re entirely on your own.
For instance, if you had signed the form and your $30,000 SUV was totalled in a crash, you would get no money for it.
“It’s something you have to [willingly agree to] sign and I would fully recommend speaking to your broker or agent about it, just so you know what will happen if you get into an accident,” Roberts said. “It’s a lot to decline if you don’t know what you’re declining.”
Insurance industry for it?
The Insurance Bureau of Canada (IBC), an industry association for insurance companies, said OPCF 49 gives consumers a “choice.”
“IBC supports an Ontario auto insurance product which enables customers to manage their own premiums and to exercise choice for insurance products tailored to their unique needs,” Anne Marie Thomas, IBC’s director of consumer and industry relations, said in an e-mail statement.
Ontario will be the only province that will let you choose not to be covered if somebody hits you, she said.
Offering this option may be appealing to insurance companies because “it would definitely save them on paying out,” Roberts said.
In a post on LinkedIn, John Baizana, an Ottawa insurance broker, said that consumers don’t want choice – they want lower premiums.
“In all my years in the insurance industry, I have never had a client say, ‘I wish I had no insurance coverage for my car when someone else hits my car,’” he said. “So instead of addressing real problems such as fraud, waste and inefficiencies within the system – consumers get ‘more choice.’”
Right now, you can save on insurance by declining optional coverage, including collision and comprehensive.
Collision insurance covers the cost to repair your vehicle if you’re at fault. If you hit someone and don’t have collision insurance, you’re on the hook for repairs.
Comprehensive insurance, meanwhile, covers almost anything else that’s not the result of a collision – including theft, vandalism, hail and flying objects.
Is the risk worth it?
How much could you save if you sign away accident coverage if somebody hits you? It will depend on the value of your car, your driving record and where you live, Roberts said.
“I did a quote for myself [and] my policy would be about $350 cheaper a year,” Roberts said. “Depending on what you pay, the savings could be significant.”
Opting out of coverage might make sense for drivers with old vehicles that aren’t worth much, she said.
“I think some people will benefit from it,” she said.
But Baizana worries it may leave lower-income drivers on the hook for repairs they can’t afford simply because “they need any savings they can on their insurance premiums.”
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