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Auto Insurance Reform – What Coverage Do I Need?

February 23, 2011

On September 1, 2010, the government of Ontario instituted a series of reforms to the Standard Auto Insurance Policy. The Standard Auto Insurance Policy represents the minimum level of insurance coverage that each Ontarian must maintain for their vehicle. Drivers can purchase additional coverage on top of the Standard Policy if they wish.

These reforms are designed to keep the cost of insurance premiums at a reasonable level while allowing consumers more choice when deciding how much insurance coverage is right for them. Insurance costs for injury claims, particularly minor injuries such as strains, sprains and minor wounds have increased dramatically in recent years. Without changes to the Standard Policy, these costs would be passed on to the consumer in the form of higher insurance premiums.

New Coverage Levels

The new reform reduces the amount of the benefits paid on the Standard Policy, while allowing consumers to purchase increased coverage if they wish. Here is an overview of the changes in coverage levels:

Medical, Rehabilitation and Attendant Care Benefits:

  •     Medical and rehabilitation benefits for non-catastrophic injuries are reduced from $100,000 to $50,000.
  •     Attendant care benefits for non-catastrophic injuries are reduced from $72,000 to $36,000.
  •     Medical, rehabilitation and attendant care benefits remain at $1,000,000 for catastrophic injuries.
  •     All medical and rehabilitation costs now include assessment costs.  

    Housekeeping and Home Maintenance Expenses:

    The benefit of up to $100 remains the same, but is now only available for catastrophic injuries.

    Income Replacement Benefit:

    The income benefit replacement is reduced from a maximum 80% to of 70% of gross income.
    With the new plan, you also have a number of options to substantially increase your coverage. The increased coverage comes with a higher premium. Depending on your circumstances, the new higher levels of coverage may be appropriate for you.

    Other Changes

    In addition to the new coverage limits, there are a few other key changes in the new policy, including:

  • If you have a minor injury in an auto accident, the maximum benefit you can claim is $3,500, regardless of the level of coverage you have chosen. In other words, the benefits listed above for medical,  rehabilitation and attendant care only apply to serious injuries.
  • Accidents in which you are found to be 25% or less at fault (based on the Fault Determination Rules in effect in Ontario) will no longer affect your insurance premium.
  • The deductible applied to court awards for fatal accidents has been removed.
  • Insurance companies must now send benefit statements to their claimants, letting them know how much they have received and how much is left until they reach their benefit ceiling.

    What does this mean for the average consumer?
    When you buy car insurance in Ontario, your policy must include each of four different kinds of insurance:

    Third Party Liability

    This type of coverage protects you from financial penalties if you are at fault in a collision that causes property damage, injury or death to another person.

    Accident Benefits Coverage

    This type of insurance provides you with a financial benefit for disability, as well as supplementary medical and funeral and death benefits if you are injured in an accident.

    Direct Compensation-Property Damage

    This allows you to receive compensation from your own insurance company for an accident in which you were not at fault. This eliminates some of the red tape involved and allows you to receive your benefits more quickly than if you had to deal with the insurance company of the driver who was at fault.

    Uninsured automobile coverage

    This covers you for losses that come as a result of a collision involving a driver who does not have insurance or cannot be traced (for example, in the case of a hit and run accident).

    These four categories of insurance coverage are mandatory and are included in all auto insurance policies in Ontario.  In addition, there are four other kinds of insurance that are optional:

    Comprehensive

    Comprehensive insurance covers any form of damage that is not collision related, such as fire, theft or flood damage.

    Collision

    This covers the cost of damage to your car caused by a collision with another vehicle or property.

    All perils

    This covers any losses other than those specifically excluded in the policy such as "Acts of God".

    Specified perils

    This protects you only for the specific perils named in the policy, such as fire, theft or any other damage that is specifically identified in your policy.
    The amount of optional coverage you choose is an individual matter based on your specific needs and is something you should discuss with your insurance agent or broker to make sure you get the right coverage for you.

    The Bottom Line

    By instituting these reforms, the government aims to keep insurance premiums from dramatically increasing in cost. With injury claims costs skyrocketing over the past several years, insurance companies would have had to substantially increase premiums to maintain the same levels of coverage. The new reforms lower the benefit payouts on  standard policies, which helps insurance companies remain profitable, while keeping standard insurance policy premiums down and giving consumers more options to choose additional coverage if they wish.

    Consumers gain other benefits as well, for example, accidents in which they are 25% or less at fault no longer affect their premiums. They are now entitled to receive benefit statements to let them know how much they have received in accident benefits and how much more they are eligible to receive, improving communication with their insurance company and allowing them to better plan their immediate financial future.

    With the new reforms, Ontario remains the province with the most generous accident benefit plans among provinces with similar insurance regulations.
    If you have any questions about the new rules or how they will affect your insurance coverage, speak to your insurance agent or broker and make an appointment to discuss your coverage. Agents and brokers are insurance professionals who can evaluate your current situation, answer any questions you may have a recommend appropriate insurance coverage for you and your family.