Should You Opt Out of DCPD Coverage (OPCF-49)?

In the province of Ontario, all registered vehicle owners are required to insure their vehicle, at the very least, with these automobile insurance coverages: third-party liability coverage, statutory accident benefits coverage, direct compensation-property damage (DCPD) and uninsured automobile coverage. That stands to change at the beginning of next year with a new option from the Ontario government to help save vehicle owners money.

Beginning January 1^st, 2024, policyholders may sign an OPCF-49 form, which will serve as the policyholder’s consent to not be compensated for the physical damage to their vehicle if it’s involved in a not at fault collision. The exchange for this is a premium discount. However, policyholders who opt out of their direct compensation-property damage (DCPD) coverage will no longer be eligible to carry collision coverage on their vehicle.

In this blog post, we will address what direct compensation-property damage (DCPD) coverage protects you from and whether the choice to remove the coverage is the right move for you.

What does OPCF-49 (Direct Compensation-Property Damage) Cover?

Auto insurance in Ontario includes several mandatory coverages, which you are required to carry per provincial government regulations. In the province, accident benefits and the right to sue in certain circumstances are arranged in a combination of a tort-based and no-fault system.

Among those mandatory insurance coverages is direct compensation-property damage, or DCPD. For brevity, we’ll use the acronym for this article. Direct compensation-property damage (DCPD) covers a vehicle for the cost of repairing physical damages if it is involved in a not at fault collision. It will also include compensation for repair costs, the loss of use of the vehicle and the value of the vehicle if it is deemed unrepairable. For example: If you are rear ended while waiting at a stop sign, it is the DCPD coverage section of your policy that will fix your vehicle because you were not at fault in the accident.

As you might imagine, having DCPD coverage can be a huge financial help in multiple scenarios. However, the temptation to save money by dropping this coverage might be greater in some individuals, who could see the opportunity as a way to cut costs and live a little riskier just to stash away a few extra bucks. Is it actually worth it to drop DCPD? Well, it depends. We’ll get into the details in the section below.

Is it worth it to opt out of DCPD coverage?

Choosing to opt out of DCPD coverage, starting January 1^st, 2024, in exchange for a premium discount is a choice you may be faced with – but is it worth it?

If you choose to opt out of DCPD coverage, it is important to note that collision coverage will no longer be an option for your vehicle, as the two coverages are intertwined when it comes to a vehicle impact loss. By removing DCPD coverage, a policyholder has to be prepared to accept the reality of having to pay out-of-pocket for damages to their vehicle, regardless of who is at-fault in the accident.

Whether to remove DCPD coverage also depends on the value of your car – or lack thereof. With the option now being presented to opt out of DCPD coverage, it might be time to look at ways to save on the insurance costs of your older vehicles.

Collision and comprehensive coverage, while valuable coverages, are items you can technically opt out of – if you so choose. By removing those coverages, you may benefit from the cost savings if your vehicle would cost more to repair than it is worth to insure. However, if you lease or finance your car, you will be obligated to carry collision and comprehensive per the agreement you have with your financing company or car dealership.

Similarly, the same applies with DCPD. While this coverage is greatly beneficial for newer vehicles, or vehicles that still stand to live a long life even after a collision or accident, older vehicles might not be as worth repairing and policyholders can save money by simply dropping their DCPD coverage. At the same time, you will find that most insurers do not recommend reducing important coverages to save money.

The benefits of reducing coverage may not outweigh the risk

Ontario has several mandatory coverages for a reason. These are to reduce a person’s financial losses in the event of a collision or an accident, since cars can be extremely expensive and not everyone has the money out-of-pocket to pay for their repairs or replacement. Additionally, many of us depend on our cars each day to get us from Point A to Point B, and we can’t afford to be without a vehicle after an accident.

With the option now to opt out of DCPD, there could be bigger costs later. Reducing coverage may only save you a few dollars per month. For example, OPCF-20 (loss of use coverage) is a coverage option designed to offer the policyholder compensation for a temporary replacement vehicle/alternative transportation until their vehicle can be fixed or replaced. It’s a great asset to have, but many people choose to drop it, assuming it costs a lot to add. The reality is that this endorsement may only cost you an additional $3-$5 per month.

Dropping DCPD may cost you more after an accident than if you were to just keep the coverage on and continue paying the extra few dollars per month. It sounds a lot better than having to pay thousands of dollars out-of-pocket for repairs or having to front the cost of a new vehicle by yourself. While there are circumstances where dropping DCPD might make sense (like for an older car with little to no value), we highly advise talking with your broker before making this decision, to see if the benefits of dropping coverage truly outweigh the risk. Alternatively, you can look at other means of saving money on your auto insurance that won’t increase your risk.

Other tips for saving money on your insurance (without reducing coverage)

Getting the “cheapest car insurance in Ontario” isn’t always the best option for when you want to save on your auto insurance coverage. Cheap doesn’t equate to quality, and cheap can sometimes end up costing you more later down the line if you discover your coverage wasn’t up to par and your recent claim ends up getting denied.

Instead, we like to focus on getting more affordable car insurance – without reducing necessary coverage. You can keep your DCPD, but consider these additional tips for saving money on your auto insurance policy:

• Compare auto insurance quotes with Excalibur Insurance’s Rate Reducer. Get the best pricing options in little time using our quoting tool and choose the one you like the most!
• Work with a broker to devise an insurance package that fits your needs and budget.
• Bundle multiple policies, like your renter’s insurance in Ontario, through the same provider as who you have your car insured through. Some insurers will offer between a 10-15% reduction per policy that is bundled.
• Raise your deductible. Common deductible amounts are between $500-$2,000, so going up a tier could help you save on your premiums. Some insurers even allow a higher deductible than $2,000.
• Stay insured through the same provider rather than jumping between providers. Loyalty often pays – and could land you a discount.
• Do a review of your coverage regularly with your broker to ensure it still matches your needs.

These are just a few tips. For more advice on how to save money on your auto insurance, give us a call here at Excalibur, or click the button below for a free auto insurance quote.