Declining DCPD coverage in Ontario

What is DCPD?

DCPD, which stands for direct compensation – property damage, is part of the no-fault insurance system in many provinces. In the past, it’s been a mandatory coverage. Since January 2024, however, Ontario drivers can buy car insurance without DCPD coverage. Adding the relevant endorsement, called OPCF 49, will remove DCPD coverage from a policy.

DCPD insures a vehicle against damage caused by other drivers. Basically, if your vehicle is damaged in a traffic accident and another driver is at fault, DCPD coverage will pay to repair your car. Even in cases of partial fault, DCPD covers the share of repairs for which the other driver is responsible.

When making a claim under DCPD, you deal with your own insurance provider, even though another driver is at fault for the damage.

You can read our DCPD guide to learn more about how it works.

What happens when you decline DCPD?

As with declining any insurance coverage, the benefit to declining DCPD coverage is lower premiums. However, this benefit comes with notable risk.

To start with, the average savings of going without DCPD may not be that significant — about a 5–10% reduction in premiums, according to some reports. Saving a few hundred dollars a year is nice, until you consider the potential downsides.

There are three major pitfalls of going without DCPD coverage:

1. You’ll have to pay entirely out of pocket for damage to your car caused by other drivers.
2. You’ll forfeit your right to recover from the responsible party or their insurer.
3. You lose the right to purchase collision or all perils coverage.

Consider what these three things really mean.

Point 1 can’t be overstated: if you don’t have DCPD coverage, you’ll have absolutely no coverage for damage to your car that’s someone else’s fault.

If another driver totals your car, you’ll have to buy a new car. If someone rear ends you at a stop sign, you’ll have to pay for every penny of the repairs. Keep in mind, even minor repairs to a vehicle can reach thousands of dollars. Having to pay for repairs when an accident is your fault is bad enough — having to pay when you did nothing wrong would be a terrible feeling indeed.

Another thing to note is that you’ll have to arrange for repairs all on your own. When working with an insurance provider, they can streamline the process thanks to their established relationships with service providers. Doing it on your own often takes longer and costs more. You also lose access to any warranties or guarantees that insurers typically include if you use their established service providers — a possible headache if you have difficulty with the vehicle post-repair.

DCPD coverage also covers the cost of alternate transportation (like a rental car) while your vehicle’s in the shop due to covered repairs. No DCPD, no rental car coverage. On top of that, you’ll need to pay for any towing or vehicle storage required — these things would otherwise typically be covered by your car insurance.

If the motivation for declining DCPD is saving money, consider that one minor accident can wipe out years of savings. If someone can’t afford DCPD coverage, they probably can’t afford to be without it.

So, without DCPD, your insurance policy won’t cover damage for which another driver is responsible. You can sue them to recover the costs instead, right?

That brings us to point 2: if you decline DCPD, you surrender your right to recover damages from the responsible party.

That means you have no legal recourse if another driver damages your vehicle, no matter how bad that damage is. You simply have to absorb the cost of repairing or replacing your car.

Finally, point 3 has serious implications as well:

Since declining DCPD reduces your premium, it stands to reason that you can’t use a different portion of your car insurance policy for something that DCPD would have covered. For this reason, when you decline DCPD, you lose the right to purchase collision or all perils coverage.

Without collision or all perils, your policy won’t cover any physical damage caused by a collision, whether it was your fault or someone else’s.

(Of course, you can still insure your car against perils like theft or fire by purchasing comprehensive or specified perils coverage if you’re eligible.)

When should you decline DCPD?

In the long run, few drivers benefit from removing DCPD coverage from their car insurance policy. As mentioned, a single not-at-fault accident would be enough to eliminate many years of savings. Unless you have total trust in every other driver on the road, why take the risk?

Drivers of new vehicles often won’t be allowed to decline it at all. If you lease or finance your vehicle, chances are the lessor or lender won’t allow you to go without DCPD, just as they likely require you to keep collision and comprehensive coverage.

A driver who owns their vehicle outright might consider removing DCPD coverage, particularly if their vehicle isn’t worth much. However, they would also have to consider what would happen if their vehicle were damaged or destroyed. Could they afford to replace it? Could they live without a vehicle? Repairing and replacing vehicles (even used vehicles) is expensive, and it’s getting more expensive all the time.

Basically, going without DCPD is a move for people who want to self-insure their vehicle — something the majority of drivers can’t afford to do.

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