Experts have cautioned Ontario drivers against opting out of direct compensation property damage (DCPD) to avoid escalating insurance costs, warning it could be a costly mistake.
DCPD coverage extends protection to drivers involved in accidents where they are not at fault, covering the costs of damages to their vehicle, potential loss of the vehicle, or damage to its contents.
The option to waive DCPD coverage was made in response to surging auto insurance rates in Ontario. The government also said the move aims to expand choices for Ontario drivers.
According to Nainesh Kotak, founder of Kotak Personal Injury Law, opting out of this coverage is only prudent when the insured is driving a vehicle valued at less than $2,000 and repairing it in the event of an accident would not be financially justifiable.
“It’s a very costly mistake to opt out of this type of coverage,” he said in an interview with Law Times.
Kotak’s reservations about Ontario’s DCPD changes mirror that of other experts in the insurance industry.
Anne Marie Thomas of the Insurance Bureau of Canada (IBC) previously cautioned drivers to consider what they would be giving up by opting out of DCPD coverage.
“This coverage provides you with a lot more protection than just damage to your vehicle,” Thomas told CTVNews in December.
By opting out of DCPD coverage, drivers will have to shoulder costs typically covered by insurance in case of a collision. This includes paying for things like tow trucks, vehicle storage, or rental cars.
Ontario’s Ministry of Finance has said that allowing drivers to waive DCPD is part of the province’s multi-year strategy to enhance the auto insurance system.
Ontario introduced this plan in 2019 with the goal of fixing a “broken auto insurance system” that has to residents seeing the highest auto insurance rates in the country.
“This is an important change the government is making to give drivers more options,” a spokesperson for the ministry told Law Times. “For example, for those who own older cars that are worth less than the cost to insure them.”
“The government remains committed to ensuring all drivers have as much choice as possible when it comes to auto insurance.”
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