What Ontario’s DC-PD change means for your auto insurance

To provide drivers with additional flexibility, the Financial Services Regulatory Authority of Ontario (FSRA) released an announcement regarding changes being made to the standard Ontario auto insurance policy, introducing OPCF 49, a form which would allow drivers to opt out of a once-mandatory coverage: direct compensation-property damage (DC-PD). Although this option, available beginning January 1, 2024, gives people more reign over customizing their coverage, dropping DC-PD could leave drivers exposed.

DC-PD is designed to compensate drivers directly if their car is damaged in a collision with at least one other vehicle. It’s part of Ontario’s no-fault auto insurance system.

With the upcoming changes, DC-PD will still be available to purchase from auto insurance carriers but drivers may elect to sign OPCF 49, which will allow them to opt out of DC-PD coverage. Policyholders can sign OPCF 49 at any point in the policy term upon January 1, no matter what stage of policy term they are currently in. The same applies for if the policyholder wishes to change their mind and wants to reinstate DC-PD (or DC-PD and all perils/collision) on their vehicle.

DC-PD coverage works if the following conditions are met:

If these conditions are not met, then you may still have coverage so long as you have collision insurance. Collision insurance is optional, however. Should the accident involve an underinsured or uninsured driver, then you may be eligible for compensation under another mandatory coverage known as uninsured automobile coverage.

If you are partly at-fault or entirely not at-fault in an accident, and all the above conditions are met, then DC-PD will cover the following:

Under Ontario’s Automobile Policy section 6.2, DC-PD offers coverage for the items listed above, but each will be subject to depreciation. You won’t receive more to repair or replace your items or vehicle beyond their actual cash value.

People might choose to opt out of DC-PD coverage to reduce their premium which can be an incentive for some drivers. The cost of DC-PD coverage can vary depending on the driver. Let’s look at a few different examples for a 36-year-old single male with a clean driving record who has been licensed for 15+ years and lives in Whitby, Ontario.

Here’s the same figures if the same individual had one at-fault accident and one minor conviction:

With this all in mind, why wouldn’t it make sense to drop DC-PD for better savings?

Here are costs you would not be reimbursed for following any damages or losses to your vehicle in the event of an accident (without DC-PD or collision coverage):

Now, take into consideration the value of those vehicles in comparison with their DC-PD coverage cost. Without DC-PD (or collision) you would be responsible for paying to repair or replace your car entirely out-of-pocket. Sure, you’d save a few hundred to a few thousand dollars a year, but that wouldn’t be nearly enough to offset the cost to replace your vehicle.

If your car is leased or financed, you may not be able to opt out of DC-PD coverage without consulting with your leasing company or the dealership. If something happened, you would end up being held personally responsible for the losses or damages to the vehicle.

Choosing to opt out of DC-PD doesn’t inherently save you money. In fact, dropping it may end up costing people more than they would have paid for their DC-PD coverage if they get into an accident. As good a driver as you are, you can’t always predict others’ driving behaviour. For lower-income drivers, choosing to opt out of DC-PD to save money might make sense, but it can result in more severe consequences if something happens.

The same way a financing company or dealership could require you to carry additional coverage options, like collision and comprehensive, they could also require you to carry DC-PD. Failing to keep your leased or financed car sufficiently insured could result in the leaser or dealership repossessing your car.

If you own an older vehicle that costs more to insure than it is worth, then it may make sense to drop DC-PD once it becomes optional. It might seem controversial to drop insurance coverage that offers protection when someone else hits you, but odds are your older vehicle would be written off regardless. Plus, the payout you would receive would be minimal and the cost savings from signing OPCF 49 might cancel that amount out.

If you aren’t sure, then your best bet is to talk to an auto insurance broker. Insurance can be confusing, and with regulations changing it can be tempting to hop on board. Our team of brokers can walk you through the pros and cons based on your personal circumstances. They’re also happy to discuss other ways to save on insurance without cutting coverages. Give us a call today.