If you're purchasing a big-ticket item brand new, especially one that depreciates quickly, a waiver can provide meaningful protection.
Imagine paying $55,000 for a new vehicle, only to receive $38,000 from insurance after it's totalled two years later. For Ontario drivers, this scenario is all too common—but completely avoidable.
If you've ever filed an insurance claim only to be surprised by how little you received, depreciation was likely the reason. For Ontario drivers, RV owners, boaters, and even homeowners, a depreciation waiver or similar endorsement can make a big difference in how much you're paid out after a loss.
In this blog, we'll explain what a depreciation waiver is, how it works, and whether it's worth adding to your insurance policy.
Understanding Depreciation in Ontario Insurance
Depreciation is the decrease in value of your property over time. Whether it's a car, camper, or household contents, most items lose value as they age. Standard insurance policies typically pay out actual cash value—meaning the replacement cost of the item, minus depreciation.
This can lead to significant financial gaps when replacing newer vehicles or high-value items.
What Is a Depreciation Waiver?
A depreciation waiver, sometimes referred to as a waiver of depreciation, is an optional endorsement that protects the original value of your insured item. If your vehicle, RV, or boat is written off or stolen within a certain time frame after purchase, the waiver ensures that you receive the full purchase price—not the depreciated value.In Ontario, auto insurance depreciation waivers are formally known as OPCF 43 (Ontario Policy Change Form 43). This is the form you'll see referenced in your policy documents.
Depreciation Waiver vs. Gap Insurance
It's easy to confuse depreciation waivers with gap insurance, but they serve different purposes. Gap insurance covers the difference between what you owe on a loan and what your vehicle is worth. A depreciation waiver ensures that you receive the full original purchase price, regardless of any outstanding financing.Real-Life Example
Let's say you bought a new SUV in Ontario for $55,000. One year later, it's involved in a collision and written off. Without a depreciation waiver, your insurance payout might only be around $38,000, reflecting the current market value.
With a depreciation waiver in place, you would receive the full $55,000, allowing you to replace the vehicle without dipping into your savings.
Where Do Depreciation Waivers Apply?
Depreciation waivers are most commonly available for:
- New vehicles
- RVs and trailers
- Boats and personal watercraft
Depreciation Coverage in Ontario Home Insurance
While depreciation waivers are primarily associated with auto and recreational insurance, homeowners can also benefit from similar protections.
For home insurance, the equivalent protection is called replacement cost coverage—and it applies to both your dwelling and personal belongings. Standard policies often default to actual cash value, which factors in depreciation.
Real-Life Home Insurance Example:
Your home suffers water damage that destroys your 4-year-old hardwood floors (original cost: $8,000). With actual cash value coverage, you might receive only $4,000 due to depreciation. With replacement cost coverage, you'd receive enough to install comparable new flooring at today's prices—potentially $10,000 or more.
Two types of replacement cost coverage exist:- Standard replacement cost: Covers up to your policy limits
- Guaranteed replacement cost: Provides additional coverage above policy limits if construction costs have increased
When to consider replacement cost coverage:
- You have a newer home or recent renovations
- You own high-value electronics, appliances, or furnishings
- You want to avoid out-of-pocket expenses when replacing damaged items
- You have expensive collections, jewelry, or art (though these may need separate coverage)
This kind of coverage is especially important for high-value personal items. Check your home insurance policy or speak with your broker to confirm whether you're covered for replacement cost or actual cash value.
Key Things to Know
Eligibility requirements for depreciation waivers can vary, but here are some general guidelines:
For vehicles, boats, and RVs:
- Must typically be purchased new or have less than 5,000 kilometres
- Must be the original owner
- Luxury vehicles over a certain value (e.g. $100,000) may not qualify
- Certain components, like tires and batteries, are typically excluded
For home insurance replacement cost:
- Usually available for both dwelling and contents
- May require you to actually replace the item to receive full payout
- High-value items (jewelry, art, electronics over certain limits) may need separate scheduling
- Slightly higher premium than actual cash value coverage
Coverage details:
- Not automatically included—you must request it and pay an additional premium
- Usually only applies to total losses, not partial repairs
Is a Depreciation Waiver Worth It?
If you're buying something brand-new and high in value—especially a vehicle, RV, or boat—a depreciation waiver is often a smart investment. It adds a modest cost to your premium but could save you thousands if a total loss occurs.
In many cases, lenders require you to carry this coverage when financing a vehicle or RV, as it protects their financial interest in the asset.
For homeowners, reviewing your policy to ensure you have replacement cost coverage for contents can offer similar peace of mind.
Frequently Asked Questions
Can I add this coverage after an accident?
No. Depreciation waiver coverage must be added before any damage occurs.
Does it cover partial damage?
Typically, no. It usually applies only to total losses.
What if I buy used?
Depreciation waivers are usually only available for new purchases or vehicles with very low mileage.
Final Thoughts
A depreciation waiver might not be the first thing you think about when purchasing insurance—but it can have a major impact on your financial recovery after a loss. Whether you're driving Ontario roads, towing your RV through cottage country, or protecting high-value items at home, it's worth reviewing your policy and discussing your options with your insurance broker.
At Youngs Insurance Brokers, we'll help you understand your coverage options and ensure your policy protects the full value of what matters most to you.
Ready to protect your investment? Contact us for a free quote that includes depreciation waiver options tailored to your needs.
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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.