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The Dangers of Opting Out of Direct Compensation Property Damage Coverage

Posted Oct 30th, 2023 in Auto Insurance, CARINSURANCE, Did You Know?, General, In the News, Insurance Tips, Media


As of Jan 01, 2024, the Ontario Government has passed a new agreement that will give consumers a new option to opt out of direct compensation property Damage (DCPD). This agreement is called OPCF 49 which is an agreement not to recover for loss or damage from an automobile collision. This change was introduced by the Ontario Government as a way to offer more choice and more cost savings to the Ontario auto product.  This may seem like it will save you money on your car insurance premium, however, there are important risk factors that drivers should consider before removing this coverage. 

What is Direct Compensation Property Damage Coverage?

DCPD coverage is a mandatory section of the auto insurance policy. It covers damage to the insured vehicle or its contents if another person is at fault for an accident. It also covers loss of use, towing, and storage costs. 

The following conditions must be met for DCPD to apply:

  1. The accident must take place in Ontario.
  2. There was at least one other vehicle involved in an accident.
  3. At least one other vehicle is also insured by an insurance company licensed in Ontario.

Also known as DCPD, this coverage pays to repair or replace your vehicle and contents, if it is damaged in an accident to the extent that you are not at fault. For example, if someone else rear-ends your vehicle, they are 100% at fault while you are 0% at fault, DCPD covers the damage to your car and contents. It allows your own insurer to handle your claim quickly and smoothly.

As of Jan 01, 2024, the OPCF 49, or agreement not to recover for loss or damage from an automobile collision is a new optional endorsement for consumers to select that removes any of the above benefits that a policyholder would get under DCPD. 

The Risks of Opting Out of DCPD Coverage

While it may sound like an ideal way to cut your monthly costs, the OPCF 49 endorsement would only benefit someone who has the financial means to pay for all the associated expenses of an accident, such as towing, storage, and replacement of a vehicle. By signing this form you are not only agreeing to not claim Direct Compensation Property damage but also opting out of Collision or Upset Coverage. This means that you will not be compensated even if you are at fault.

You'll be responsible for the full cost of repairs if your vehicle is damaged. Even if the accident is the other driver's fault, without DCPD you'll have to pay out of pocket for all related collision expenses, including storage, and towing. This could mean paying thousands in repair bills.

Those who are financing or leasing a vehicle should not opt out of DCPD without consulting with the lease or financing company. If a driver of a leased or a financed vehicle does opt out of DCPD, and is involved in a non-fault accident, they would be responsible for settling the outstanding balance of their car's purchase price to the dealership.

The Benefits of Keeping DCPD

Given the risks, Ontario drivers may want to think twice before removing DCPD protection. Here are some benefits of keeping this important coverage:

Claims are handled smoothly through your own insurer. You are working with your insurance company who wants to have the claim resolved for you.

Peace of mind that accidents won't become a financial burden. Repairs will be covered to the extent that you are not at fault.  If you are partially at fault, repairs will be covered if you carry the optional Collision or All Perils coverage. 

While the province is removing the requirement for DCPD coverage, there are still clear benefits for drivers who choose to keep this protection. By dropping it, you take on greater financial risk and liability exposure. For most Ontario drivers, paying a little extra in premiums is worthwhile to have this backup coverage in place. So, before you remove DCPD to save some money, consider whether the risks outweigh the savings. In many cases, keeping this important coverage is the wisest choice.

At Youngs Insurance Brokers, our commitment is to provide you with unwavering support and guidance when it comes to safeguarding your valuable assets. Whether you're seeking clarification on DCPD coverage or have inquiries about any other aspect of your insurance policy, our dedicated brokers are here to assist you. We're always happy to review your policy with you and address any questions or concerns you may have. Your peace of mind is our priority, and we're always just a call or message away, ready to ensure that you have the protection you need. Don't hesitate to reach out to your trusted broker today.

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Disclaimer: The information provided on this blog is for educational purposes only and is not intended as professional insurance advice. The coverage, terms, and conditions of each insurance policy are unique and subject to individual circumstances. The information provided does not guarantee the availability or suitability of any insurance policy for your specific needs. You should not rely on the information in the blog as an alternative to professional advice from your insurance broker or insurance company. If you have any specific questions about any insurance matter, please consult a licensed insurance broker for personalized advice and guidance.

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