What does optional DCPD mean for Ontario drivers?

This post was first published on May 25, 2023, and was updated on November 30, 2023.

As of January 1, 2024, drivers will have the choice to drop DCPD from their auto insurance coverage. Here's what you need to know about how this change could impact the price you pay for auto insurance.

No-fault insurance was introduced in the province of Ontario in 1990 with the introduction of the Ontario Insurance Act. The program included Direct Compensation for Property Damage (DCPD), a type of auto insurance that allows a policyholder to seek coverage from their insurance provider to repair damage caused by a collision that was not their fault. DCPD has been a mandatory part of Ontario auto insurance coverage ever since. However, in late 2022, it was announced that Ontario policyholders could opt out of DCPD coverage as of January 1, 2024, making DCPD insurance optional in the province.

What is the new insurance option in Ontario 2024?

This is a common question being asked online these days. While there isn’t a new insurance option being released in 2024 in Ontario, one of the key elements of Ontario’s no-fault auto insurance is becoming optional in 2024, which is a major change to Ontario’s auto insurance industry. 

Direct Compensation for Property Damage (DCPD) is part of the no-fault auto insurance program mandatory in many Canadian provinces, including Alberta, Nova Scotia, New Brunswick, Newfoundland and Labrador, Ontario, Prince Edward Island, and Quebec.

No-fault insurance means damages caused by a collision will be covered by a party’s own insurance policy, regardless of who was at fault. The DCPD covers the damage done to a policyholder's vehicle when the crash is not their fault. Before DCPD, damages incurred by the not-at-fault driver would be covered by the at-fault driver’s insurance provider, creating a longer, more complicated process in which the innocent party had to deal with an insurance company they did not choose.

There is rarely an insurance deductible on the DCPD section of an insurance policy, meaning the policyholder will not have to come up with any out-of-pocket money to have their vehicle repaired.

Is DPCD mandatory?

DPCD will no longer be mandatory as of January 2024. In December 2022, the Financial Services Regulatory Authority of Ontario made some changes to the province’s insurance requirements in an effort to give consumers more control over their coverage and help reduce premiums. 

These changes include expanded access to usage-based insurance, and Ontario Policy Form 49, or OPCF 49, an agreement not to recover for loss or damage from an automobile collision.

Under OPCF 49, an Ontario driver can agree not to receive compensation for damages caused to their vehicle in a collision that was not their fault.

In short, this means Ontario drivers can opt out of DCPD on their car insurance policy and waive their opportunity to claim damages from their own insurance provider in the event of a motor vehicle collision that was not their fault.

Read More: Insurers are obligated to provide this option in Ontario Regulation 664 Automobile Insurance.

Why should I keep my DCPD insurance coverage if it’s not mandatory?

While letting go of your DCPD insurance may save you a little bit of money in the short term, it’s a decision that could cost you a lot of money in the long term. 

Opting out of your DPCD insurance will likely reduce the cost of your car insurance premiums.  Drivers who carry DCPD coverage are more likely to make a claim from their insurance provider, so it makes sense that opting out of DCPD coverage will reduce a person’s insurance premiums. However, opting out of this important protection also significantly increases the level of risk you take on while you’re out there driving on Ontario roads.

Declining DCPD coverage is essentially declining the no-fault element of an insurance policy. Without DCPD, a policyholder would still be covered in an accident that was not their fault and protected from liability if they cause damage to property or harm to a person. However, if a driver opts out of DCPD coverage, they are agreeing not to recover damages from their insurance provider if they are in a collision that is not their fault.

Here are two things to think about before opting out of DCPD:

• Vehicle repairs are taking longer than ever thanks to parts shortages and supply chain disruptions, and DCPD makes the repair process faster by allowing a policyholder to deal only with their own insurance provider, rather than having to coordinate with the provider of the other person involved in the crash.
  
  
• The price of vehicles and vehicle repairs have increased significantly over the past 2-3 years as Canadian inflation hits an all-time high – opting out of DCPD insurance puts you at greater risk of paying for vehicle repairs or replacement out-of-pocket.
  
  
• If a person leases or finances a vehicle, opts out of DCPD and has an accident in which they are not at fault, they would still be in debt to the dealership for the full cost of the vehicle. Keep in mind that leasing a vehicle means you do not actually own it, and the true owner of the vehicle (usually the dealership) will usually require certain levels of insurance to be in place, which may include DPSP. 

The bottom line

Direct Compensation for Property Damage, or DCPD, is part of the no-fault insurance program mandated in multiple Canadian provinces, including Ontario.

In January 2024, DCPD will become optional in Ontario, giving drivers in the province the option to decline DCPD coverage, essentially declining the no-fault element of their insurance policy and agreeing not to have insurance coverage for costs associated with a not-at-fault collision. 

Declining DCPD coverage makes a person less of an expense risk for insurance providers, therefore reducing the cost of a person’s policy premiums. However, it also puts a driver at risk of having to pay out-of-pocket for expenses related to a crash where they were not at fault.

There are many things to consider before deciding whether to opt out of DCPD coverage. Be sure to speak with your insurance broker to learn how the pros and cons apply to your unique situation.

Also read:

• What is no-fault insurance?
• What is high-risk auto insurance in Ontario?
• What is car insurance fraud in Canada?