Direct compensation for property damage

All drivers in Canada are legally required to purchase automobile insurance. While provinces and territories have different regulations regarding which insurance policies are mandatory, in Ontario and Alberta, direct compensation for property damage is one of them.

So, what exactly is direct compensation for property damage, and how does it work? Stick around to ensure you make informed decisions the next time you're up for renewal.

What is direct compensation for property damage?

Direct compensation property damage, also known as no-fault insurance, is a type of auto insurance policy that provides coverage to policyholders if they are involved in an accident where they are not found at fault for damages.

How does DCPD coverage work?

Should you be involved in a car accident where the other driver is responsible, DCPD covers vehicle damage by compensating you for car repairs and replacements directly from your own insurance company.

By allowing you to go through the claims process with your own insurer rather than through the at-fault driver, you'll be compensated directly and more efficiently, rather than having to deal with a third-party provider.

Is direct compensation property damage mandatory coverage?

While automobile insurance is mandatory in all areas of Canada, DCPD is only required in Alberta, Ontario, Quebec, Nova Scotia, New Brunswick, Newfoundland, and Prince Edward Island.

Does DCPD coverage have a deductible?

Although a lot of insurance policies require policyholders to pay a deductible before their insurer pays the rest, direct compensation does not require a deductible. Your vehicle repairs will be covered by your insurance provider without having to fork out your own cash for part of the repairs needed.

DCPD coverage rules in Ontario

Starting this year, drivers in Ontario can opt out of direct compensation for property damage with their insurer. That said, whether or not you choose to do so will depend on your specific circumstances.

Let's say that you do end up getting involved in an accident with another vehicle. Without DCPD, even if you are not found at fault, your insurance provider will not provide any form of compensation to you.

How does direct compensation property damage work with a no-fault system?

As we mentioned, direct compensation is a type of no-fault insurance that covers damage to a vehicle caused by another driver. Some provinces in Canada, like Ontario, work on a no-fault insurance system, meaning that drivers are able to collect directly from their insurer regardless of who is found at fault for the incident.

Now, in the event that you were found at fault for damages to the other driver involved, your fault insurance would not cover you for damages that occur to your vehicle. However, if you have collision insurance, you can still have your vehicle repaired. It would just be under a different policy. When it comes to fault, an insurance professional from your company will use the rules listed in the Insurance Act to assess the situation.

What are the benefits of direct compensation for property damage?

If you have the option of adding this type of no-fault insurance, also called direct compensation, and are still undecided about whether it's worth the added insurance costs, take a look at some of the benefits this type of coverage offers:

1. More efficient claims process

With this type of insurance, your claim for damages will be expedited by removing the need for you to deal with the other driver involved and their insurance company. This way, you can get any repairs or replacements handled at a faster rate than you would if you did not have this type of coverage.

2. Repairs and replacements are more expensive

Should you choose to opt out of direct compensation for property damage and are found not responsible for the collision, you may have to pay out of pocket for your repairs and replacements, which could significantly impact your overall finances.

3. Peace of mind

While opting out of this coverage can offer potential savings on your overall premium, the minimal added cost can offer you peace of mind, knowing that your investment into your vehicle is protected, along with your finances, should others cause damage to your car.

Ultimately, this type of coverage is an added security blanket for those who are insured by guaranteeing their claim will be processed in a timely manner, so they can get back to their daily schedule with minimal disruptions.

Additional car insurance you need

Beyond direct compensation property damage coverage, all Canadian motorists who operate a vehicle on public roads must purchase the following types of auto insurance:

Third-party liability insurance

Third-party liability insurance protects policyholders in the event they are found at fault for causing bodily harm or property damage to a third party while operating a motor vehicle. In the event a third party files a claim or lawsuit against you, this insurance policy will cover the cost of legal fees, medical and rehabilitation expenses, funeral costs, and other expenses associated with the proceedings.

All drivers must purchase a minimum coverage limit for this insurance coverage, depending on the province or territory in which they live.

Accident benefits coverage

Accident benefits coverage is mandatory in most provinces and territories in Canada. This insurance will kick into place in the event you are involved in a collision where either you or your passengers are injured. Regardless of who is found to be at fault for the incident, accident benefits insurance will cover the cost of medical bills, rehabilitation costs, funeral expenses, lost wages, and other related fees.

Uninsured motorist coverage

Uninsured motorist coverage is meant to protect drivers if they are involved in an accident with an uninsured driver or underinsured driver. With uninsured motorist insurance, your insurance company will ensure that you are compensated for any losses that arise from a collision with someone who does not have enough coverage to fairly reimburse you. This insurance also protects policyholders if they are involved in a hit-and-run collision.

Optional insurance

Beyond the mandatory car insurance mentioned above, there are also a couple of auto insurance policies you may want to consider as a way to supplement standard plans for additional protection:

Comprehensive car coverage

Comprehensive car coverage protects and compensates policyholders in the event their vehicle suffers damage as a result of a non-collision event. Common insured events include theft, vandalism, damage caused by severe weather, and objects. Note that comprehensive coverage has a deductible, which is an amount you will need to pay before your insurance company pays the rest.

Collision coverage

Collision car coverage is a type of property damage insurance that will compensate you for any repairs or replacements you require for your vehicle that is damaged during a collision. Collision coverage is another optional insurance policy that requires policyholders to pay a deductible amount before their policy will cover the rest.

Accident forgiveness

Accident forgiveness is a one-time insurance policy that you can add to your auto insurance portfolio. Typically, following an at-fault collision, your insurance rates will increase. However, with accident forgiveness, your first at-fault accident will not count toward your insurance premiums. The goal of accident forgiveness is to encourage safe driving and benefit those who have safe driving habits.

If you have accident forgiveness on your insurance and want to maintain a clean driving history, brush up on your safe driving tips with our comprehensive guide. You may even qualify for a safe driver discount the next time you're up for a renewal!

Contact BrokerLink for affordable car insurance today!

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FAQs on direct compensation property damage

Do I need to contact my insurance company after a car accident?

Yes, reporting a car accident to your provider is recommended, especially if you plan on filing a claim. By not informing your provider, you put yourself at risk of being uncompensated for damages should the other motorist involved not have enough insurance or not have coverage at all. This means that you'll have to pay out of pocket for any repairs or replacements needed for your vehicle. Additionally, should your vehicle be damaged as a result of theft or vandalism and your personal belongings stolen, you would also be left to pay for any costs associated with this type of claim. When it comes to your insurance provider, they are there to help compensate you should the unexpected occur.

Do I need to notify the police following a collision?

Whether or not reporting a car accident to the police is required depends on the province or territory in which the collision occurred. For example, if the total damage between vehicles is over a certain amount, should a pedestrian be involved, any injuries occur, or a crime be committed, these are general reasons why law enforcement should be called. Another reason why you may want to call law enforcement is if you are unsure who is at fault or if a hit-and-run happens. When in doubt, having a police report can benefit you during your claims process as it provides your adjuster with more information about what happened to cause the collision.

Do I deal with my insurance company or the other driver's insurance company after an accident occurs?

If you live in a province that has a no-fault insurance system, you would deal directly with your own insurance provider rather than dealing with the other drivers. This is essentially in place to ensure that drivers who are in a collision are able to receive care and any repairs they need. Additionally, this type of process is usually used in provinces that have a private insurance system.

What is shared fault?

An at-fault collision happens when more than two cars collide. In this case, insurance companies have to determine if one driver was considered more to blame for the collision than the other. This is important because whichever motorist is found to be at fault may be responsible for financially paying everyone else affected by the collision. Now, when it comes to shared fault, insurance providers have determined that both drivers or all drivers in the collision share 50% of the responsibility for what happened. If any of the drivers is over 50% at fault, that means that they are at fault for what happened.

Does DCPD coverage apply in hit-and-run accidents?

Unfortunately, no direct compensation for property damage does not deal with claims involving hit-and-run accidents. While you will still be able to file a claim with your insurer, your uninsured motorist coverage is the portion of your coverage that will handle hit-and-runs specifically.

If you have any questions, contact one of our local branches.