During the recent 2020 Ontario budget revealed by the Government, it was announced that Direct Compensation Property Damage - a significant component of mandatory auto coverage – would be made optional in the future. This blog covers what you need to know about Direct Compensation Property Damage collision coverage and why you must ask questions before your next auto insurance policy renewal.
What is Direct Compensation Property Damage
Direct Compensation Property Damage, is a mandatory component of auto insurance policies in provinces where no-fault insurance exists, including Ontario, Quebec, Nova Scotia, New Brunswick, and Prince Edward Island. With Direct Compensation Property Damage coverage, your insurer pays to have your vehicle as well as your belongings in the vehicle repaired after a collision. It is part of the no-fault system, so it doesn't matter whether you're at fault or not. By dealing with your own insurer, the process is faster and simpler.
How Direct Compensation Property Damage Works
Relevant section from the 2020 Ontario Budget:
“Increasing choice for consumers by enabling insurers to offer more coverage options, including optional not-at-fault property damage coverage (known as Direct Compensation - Property Damage) for drivers who may determine that insuring their older vehicle costs more than the vehicle is worth. The government is also proposing to increase convenience for consumers by allowing credit unions to sell insurance in their branch, and online through a subsidiary or partnership.”
The Risks Associated With Optional Coverage Direct Compensation Property Damage
While the Government is introducing Optional Coverage Direct Compensation to “increase choice for consumers" and its implementation could result in savings of about $300.00 per policy for consumers, we must be careful that most consumers could be inadequately protected particularly in the event of not-at-fault crashes where their vehicles needs extensive repair. In such a case, consumers would bear the brunt of those costs.
Direct Compensation is like collision coverage but it's for not-at-fault vehicle damage. On average, DCPD cover costs about $300.00 per policy and would represent for many consumers some significant savings. Vehicle damage claims costs have increased dramatically in recent years and premiums have not kept pace.
It is important now, in the present, more than ever to be aware of your insurance coverage and takes steps to protect yourself in the event of an unfortunate collision in the future.