What does optional DCPD mean for Ontario drivers?

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), which is a type of auto insurance that allows a policyholder to seek coverage from their own insurance provider to repair damage caused by a collision that was not their fault.

DCPD has been a mandatory part of insurance coverage in Ontario 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 DCPD?

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 a 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.

What is optional DCPD in Ontario?

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, which is 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 will have the option to opt out of DCPD on their Ontario 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.

Should I opt out of DCPD coverage when I renew my insurance?

Opting out of DCPD 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.

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. If a person feels their vehicle is not worth very much, they may choose to opt out of DCPD because, if the vehicle is damaged in a crash, it likely won’t be worthwhile to have the vehicle repaired. 

However, while opting out of DCPD will reduce the premium costs paid upfront, there are situations that should be considered before a decision is made. 

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

• Vehicle repairs are taking longer than ever thanks to COVID-related 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.
• 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.

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 provider 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?