You can soon opt out of Direct Compensation-Property Damage coverage. But should you?

Ontario drivers will soon have a new option when it comes to claiming coverage in a collision: The option to claim no damages at all.

The Financial Services Regulatory Authority of Ontario (FSRA) announced last December that the Ontario Policy Change Form (OPCF) 49 will now allow drivers to opt out of Direct Compensation-Property Damage (DC-PD) coverage.

That’s a lot of acronyms, but what it basically means is that in the event of a collision where the driver is not at fault, they can choose not to be compensated for costs related to:

1. Repair
2. The car’s value or its replacement
3. The loss of use, or
4. Damage or loss of the contents inside the vehicle.

OPCF 49 was introduced as a measure to “enable innovation and choice,” according to the provincial announcement.

It was announced as part of a larger plan set out by the Ontario government in 2022 to reduce auto insurance rates and provide drivers with more flexibility in their insurance coverage, which also includes wider adoption of usage-based insurance (UBI) and other measures.

Under OPCF 49, formally known as the “Agreement Not to Recover for Loss or Damage from an Automobile Collision,” the driver can agree not to recover compensation from their insurance company nor claim reimbursement from other parties, including the driver found at-fault for the collision in the first place. But what does that really mean?

What is Direct Compensation-Property Damage?

Direct Compensation-Property Damage (DC-PD) coverage falls under the Ontario Insurance Act, passed in 1990 when the province transitioned into a no-fault insurance system. All drivers in Ontario are covered under this mandatory coverage for their own benefit: If you are in a not-at-fault or a partially-at-fault collision, DC-PD ensures that you can get compensation in a timely fashion from your insurance provider without having to wait for the other driver to process a claim through their own insurance company or sue the other driver for damages.

It is different from collision coverage, which is an optional add-on to an insurance policy for damages arising in at-fault collisions. DC-PD makes sure that no matter who you are, what make of car you’re driving, whether it’s leased or owned, and what your policy includes, you are still entitled to recover damages (less your deductible) from a collision from your insurance company if you are not at fault — as long as the collision happens in Ontario and the other driver is insured in Ontario.

Why would anyone opt out of DC-PD?

As mentioned earlier, the ability to opt out of DC-PD was introduced as a measure to give drivers more flexibility in their coverage and help keep auto insurance rates low.

Since DC-PD is still managed by your insurance company (hence the words "direct compensation"), if a driver opts out of this coverage, they could potentially save five to 10% of their total annual premium, depending on the market and company, according to Daniel Ivans, RATESDOTCA insurance expert.

However, there are very few people and scenarios to which Ivans would recommend this option.

“Maybe in rare instances where a vehicle carries little-to-no value and a consumer has determined that they would not be impacted by any loss or damage to the vehicle itself,” he says. “But in general, opting out of this coverage would not be advisable.”

While signing away DC-PD coverage might be tempting for cash-strapped Canadians who consider their premiums already too high, the loss of the vehicle will likely present a bigger burden.

Should you opt out of DC-PD?

The form states “Even though you are not at fault, your insurance will not cover this or help you with the loss. You must arrange for your repairs and rental vehicle, all at your own effort and expense.”

If a driver opts out of this coverage, they agree to not to recover damages — there’s no responsibility on the part of the insurance provider to issue any collision or upset coverage to the insured.

That can impact someone in many different and expensive ways.

For example, if a driver of a leased or financed car opts out of OPCF 49 and gets into an accident in which they are not at fault, they would still have to pay their dealership back the remainder of the price of their car. (In fact, the form explicitly mentions that these should consult their financing company before signing).

Lengthened vehicle repair times could also significantly extend the loss of use of a car. Due to supply chain issues dating back to last year and the global semiconductor chip shortage, what might have been once a relatively quick repair job has turned into weeks- or months-long waits. Loss-of-use coverage is an optional add-on for most policies, and often have a standard cap of $1,500, after which the driver’s on their own to handle car rental fees.

Meanwhile, car rental fees have also gone up. Last August, CBC reported rental prices of over $2,000 a month for a basic sedan, and short-term fees of over $120 per day, with no foreseeable relief anytime soon.

For those reasons and others (namely, peace of mind), it’s best to keep your DC-PD coverage where it is — especially if money is tight.

“As a general rule of thumb, if a client is declining a coverage due to affordability, they probably can’t afford not to have the coverage,” says Ivans.

The bottom line

Once you sign the OPCF 49, you’re foregoing your choice to be covered in the event of an accident. You may choose to reinstate DC-PD back into your policy and pay the difference in premium later — but until then, your insurance company  has no obligation, legal or otherwise, to help you with any damages in the case of a not-at-fault collision.

The FSRAO is planning on making OPCF 49 available to all Ontario drivers through their insurance providers on January 1, 2024.

But instead of signing away a crucial bit of coverage, you can avoid paying more than you need to on your premium by shopping around auto insurance rates.