Adapting to Regulatory Shifts: Understanding Your Personal Auto Insurance Coverage
Buckle up, Ontario drivers — as of July 1, nine out of 12 standard auto accident insurance benefits are becoming optional. While these new à-la-carte options are meant to give consumers more choice, some experts worry Ontarians will opt out of crucial coverage to save money, which could cost them greatly in the event of an accident.
The government says it’s making these changes to provide Ontario drivers with more flexibility, as some already pay for benefits through an employer or private insurance plans.
“Our government is providing drivers with greater choice and convenience when purchasing automobile insurance so they can choose the right policy that fits their needs,” Sarah Chapin, director of strategic communications and issues management for Ontario’s Finance Minister Peter Bethlenfalvy, said in an email to the Star.
But these changes mean consumers have to make some difficult trade-offs between modestly lower premium costs and taking on additional risk.
“Many consumers have savings at the forefront of their mind, but it’s important to consider what coverage they could lose in the process of saving,” says Daniel Ivans, an insurance expert for Rates.ca. “As soon as coverage is declined, that means that exposure has opened up.”
Here’s what Ontario drivers need to consider about their auto insurance policies.
What’s optional and what’s not?
The following auto accident benefits will become optional: income replacement benefits; non-earner benefits; caregiver benefits; lost educational expenses; expenses of visitors; housekeeping and home maintenance; damage to personal items; death benefits and funeral benefits.
Standard medical, rehabilitation and attendant care benefits will continue to be included in all auto insurance policies, which cover medical expenses, therapy, personal care assistance for injuries from an accident (including doctor visits), physiotherapy and help with daily activities such as bathing.
How will insurance premiums change?
Choosing to forgo these optional benefits may impact insurance premiums, which means Ontario drivers on tight budgets may choose not to opt in.
Morgan Roberts, vice-president of RH Insurance, says removing all of the optional auto accident benefits will save Ontarians approximately $100 a year (that’s around $8 a month). “That’s a very small price to pay in income loss,” she says, adding that death and funeral costs can also be costly.
Amanda Dean, vice-president of Ontario and Atlantic for the Insurance Bureau of Canada (IBC), says the premium difference won’t be significant, but points out that the costs will depend on the insurer. During the 12 months after July 1 when policies renew, “we’ll see how the system works in terms of costs,” she says.
Who should opt in and who should opt out?
Ontarians who are purchasing a policy on or after July 1 will have to opt in to the optional accident benefits they want to purchase. Make sure you ask your insurance agent or broker which benefits are included in your quote.
If your policy comes up for renewal, you should hear from your broker via letter mail, email or phone, and your broker will discuss whether you want to opt out of the optional benefits, Dean says. If your insurance agent or broker is unable to reach you, your current policy will renew automatically with your current coverage and limits. You will then need to agree in writing to decline the benefits or make changes to them.
People who are most concerned about saving money usually need the most coverage, Ivans says. “If saving $5 to $30 a month is meaningful and impactful at a household level, then a loss of thousands of dollars is going to be potentially devastating.”
If someone is unable to work as a result of a car accident, income replacement benefits (which Ivans says typically cost $10 to $20 a month) can provide up to $1,000 a week.
For some Ontario drivers, it might make sense to opt out of some of the benefits. For example, Roberts says someone who is retired likely won’t need income replacement. It’s critical you find out whether you already have certain coverage through your private health plan or workplace benefits to avoid coverage gaps.
What new changes mean for pedestrians not covered by insurance
Another big change is that these newly optional accident benefits will only apply to the named insured, the spouse of the insured, dependants of the insured and of the insured’s spouse, and people specified in the policy as drivers of the automobile. That means if a pedestrian or cyclist is hurt in an accident, the driver’s standard no-fault coverage will apply, but the pedestrian will have to rely on their own auto insurance policy for optional accident benefits.
Harvey Naglie, consumer advocate and former senior policy adviser with the Ontario Ministry of Finance, says he’s concerned for gig workers like food-delivery cyclists who could be hit without coverage. For someone who ends up in the hospital or homebound for six months without insurance, he says, the only prospect they would have to get compensated would be to take the driver to court.
Jay Ralston, president of the Ontario Trial Lawyers Association, says people who are injured and don’t have their own optional auto accident insurance benefits will “almost certainly” be required to rely on a public purse of some sort for benefits.
Seek out information and speak to your broker about your needs
Ralston is concerned that consumers will end up without the coverage they need at the time they need it the most. “We’re most concerned with a lack of public education on the choices,” he adds. “If we had our preference, they would not go to opt-in benefits. We would prefer to see them as opt-out, so that you had to consciously choose not to take a benefit.”
The Ministry of Finance’s Chapin said in an email that “the Financial Services Regulatory Authority of Ontario (FSRA), the Insurance Bureau of Canada (IBC), and the Registered Insurance Brokers Association of Ontario (RIBO) have published materials to help insurers and brokers better understand the upcoming changes and to assist consumers in understanding their coverage choices.”
The IBC’s Dean says brokers and agents have gone through consistent training around what these new policies will look like. She says the IBC’s information page on auto reforms in Ontario received 90,000 clicks in just one month, which tells her people are seeking out information. The IBC has also provided MPP offices with information cards.
“We are genuinely working to get the message across that we purchase insurance for those ‘what if’ scenarios,” Dean says. “Taking a look at your personal situation and what you would need if involved in a collision is absolutely critical.”
Every expert interviewed for this article emphasized the importance of Ontario drivers having in-depth conversations with their insurance agent or broker about their needs to make sure their costs will be covered in the event of an accident. Steve Rastin, senior counsel and lawyer at Rastin Gluckstein Lawyers, says to ask your broker to explain exactly what each optional benefit covers and how much each one will cost so you can make an informed choice about whether you want them. “People need to risk check their own lives and say, ‘If I get in a car crash and all of a sudden I can’t work, and I have no coverage, is it going to ruin me or not?’ ”
Keep in mind that as of July 1, auto insurance will pay first for medical or rehabilitation benefits (excluding medication costs) for injuries sustained in an accident before your workplace or private health plan benefits kick in.
If you’re trying to save money, Roberts says to reach out to an insurance broker to see if there are other ways you can save. For example, if you used to have an hour-long commute to work and now you work from home, that change in mileage could lower your premium.
The IBC and the Financial Services Regulatory Authority of Ontario (FSRA) have information on their websites that explain what each of the nine optional benefits encompass. Consumers with questions about the changes can reach out to the IBC through its consumer information line at 1-844-227-5422.
You can change your optional accident benefits any time, so if you have a change of heart or your circumstances change (having a child or starting a new job), you can contact your insurer, agent or broker to review your options. Just keep in mind that only the coverage in place at the time of an auto accident will apply to your claim.
This article was first reported by The Star
