A FORK IN THE ROAD

Drivers will soon have a new way to save on insurance, but they’re being advised to pump the brakes

Ontarians will soon get a new way to save money on car insurance — but experts are warning drivers to proceed cautiously.

As of January, by signing a form called OPCF49, or Agreement Not to Recover Loss or Damage From an Automobile Collision, motorists will be able to choose to opt out of direct compensation property damage (DCPD) coverage. This would cut their insurance bill, but remove protections to their vehicle in the event of a not-at-fault collision, according to new guidance by the Financial Services Regulatory Authority of Ontario.

This will give consumers more choice when it comes to auto insurance, said Scott Blodgett, spokesperson for the Ontario Ministry of Finance.

“For example, for those who own older cars that are worth less than the cost to insure them,” he added.

Many drivers in a tight financial spot might feel inclined to opt out, especially with insurance premiums surging across the province due to supply-chain constraints, rising car thefts and growing inflation. But while a discount may seem tempting, the savings will likely pale beside the thousands of dollars they’ll have to pay out-of-pocket if their car

gets damaged in a collision, insurance experts say.

“It would be a potentially devastating idea to opt out of DCPD,” said Daniel Ivans, insurance expert and licensed insurance broker at RATESDOTCA, a rate comparison website.

Opting out won’t lower premiums on individual insurance policies as much as one would think, he said.

“If you’re taking that risk in order to save $20 to $40 a month, then you’re going to be in a lot of trouble when you actually have to drop thousands on a new car or on car repairs, which are more expensive now with inflation.”

Ontario is a no-fault insurance province

Auto insurance typically has four coverage components: third-party liability; accident benefits; uninsured auto; and DCPD. (According to the FSRA, the average DCPD coverage premium was $359 in 2022; as of June 2023, the average written premium in Ontario was $1,737.)

DCPD protects car owners against damages to the vehicle, contents inside the vehicle as well as costs related to the loss of use of the vehicle in accidents in which they were not at fault.

In other words, even if your lowvalue winter beater gets rear-ended by another driver, you’d still have to pay for towing, storing and renting a replacement car, said Anne Marie Thomas, director of consumer and industry relations at the Insurance Bureau of Canada.

That’s because, like several jurisdictions in Canada and in the U.S., Ontario is a no-fault insurance province, meaning that each driver’s insurance will handle their claims, regardless of who caused the collision.

(Without DCPD, drivers who have been hit will not be able to sue or recover losses in any other way from the person at fault.)

Thomas also noted that drivers who are leasing or financing their cars should check with their dealer or lessor before opting out, as they might be required to keep full coverage.

Bundling insurance coverages can save you money

Rather than exposing themselves to more risk, there are other avenues consumers can consider to lower their premiums.

Ivans advises them to first contact their insurance representative to find out if there are discounts they haven’t already taken advantage of: “It’s the best way to lower your premiums, but still insulate yourself from loss.”

For example, they can try “bundling” by buying different coverage from the same insurance provider.

“If your home and auto aren’t bundled together, there’s 10 to 20 per cent that you can save right there (on premiums) by bundling those,” he said.

Some providers also offer deals to retirees as well as to certain university alumni, he added.

For car owners who think they don’t use their vehicles enough to maintain full insurance coverage, Thomas recommends that instead of opting out of DCPD, they consider installing a telematics device, which adjusts rates based on a driver’s driving habits.

“Some insurance companies will even give you a discount just for agreeing to use it,” she said.

Low-risk drivers might see their premiums reduced by 30 per cent if they use the device, Ivans added.

Decisions like this are ultimately financial decisions, which require a risk-reward analysis, said Thomas.

“You might save a little bit of money on your premium, but what could that cost you in the event of a claim? Is the little bit of savings worth it?”