On September 1, 2010, a number of significant changes to auto insurance in Ontario took effect, which dramatically reduced the benefits available when someone suffers a personal injury in an automobile accident. Now, benefits that were part of the standard policy of auto insurance have been shifted instead onto a menu of numerous optional benefits, which can be purchased for an additional premium. The number of options and their complexity has increased to the point where it is even difficult for insurance brokers and agents to understand, let alone explain, all the options and when, or if, they should be purchased. It is hard to imagine the average motorist understanding what to do. Most people only realize the importance of the decisions they should have made before their car accident, after the fact, when they talk to an accident benefits lawyer, like one of the lawyers in Lerners' Personal Injury Group.
This short blog will outline the choices available to consumers.
OPTIONAL INCOME REPLACEMENT BENEFIT
Unless the optional income replacement benefit is purchased, anyone who suffers a personal injury in a car crash has his loss of income benefit capped at no more than $400 per week. Consumers can purchase, for an additional cost, increased optional benefits in amounts up to $600per week, $800 per week, or $1,000 per week. What the driving public must understand, however, is that, when an optional income replacement benefit has been purchased, the quantification of the benefit to be paid following an accident is still determined based on the actual income earned by the claimant prior to the motor vehicle collision. Many consumers are confused by thinking that, if a $1,000 per week benefit has been purchased, $1,000 per week will be paid following a devastating accident. If there has been a change with a job, or if the consumer has simply misunderstood how the optional benefit works, even though the additional premium has been paid, that consumer may find that he or she is entitled to something evenless than the $400 per week maximum amount that is offered as part of the standard auto policy.
It's important to remember that the auto insurance policy in Ontario is intended to be the "payer of last resort". That means, if you have some other kind of income replacement program in place, such as short or long-term disability through your work, then your auto insurance payout will be reduced by the amount of the benefit you get from your employer plan. Even high wage earning consumers might not benefit from an optional income replacement benefit if they have a generous long-term disability policy through work or by way of a private policy.
Consumers need to conduct a careful analysis of their income and the income of the other people who are likely to be covered under their auto policy, such as spouses and children, along with the existence of other income continuation insurance policies, in order to ensure that it is in fact wise to purchase one of the optional income replacement benefits. Brokers and consumers need to complete a careful annual review of the optional income replacement benefit category of accident benefits to ensure that the right option, if any, has been selected. Injury lawyers anticipate litigation developing on the improper choice of income replacement optional benefits. It is advisable to take a close look at your policy.
OPTIONAL CAREGIVER BENEFIT
Prior to September 1, 2010, someone suffering a personal injury in an automobile accident, who was unable to care for his or her child, received up to $250 per week as a childcare benefit for the first child, and an additional $50 per week for each additional person in need of care (but would have to choose either income benefits or caregiver benefits, not both). This benefit was eliminated entirely, effective September 1, 2010, unless the personal injury victim suffers a "catastrophic impairment" as a result of the motor vehicle accident (which is a complex and specially defined test).
An optional benefit has now been created which must be purchased in advance, in order to pay the same caregiver benefit that was formerly part of the standard auto policy prior to September 1, 2010. The optional caregiver benefit provides for a $250 payment, as an incurred expense, if an insured person suffers a "substantial inability to engage in the caregiving activities that he or she engaged in at the time of the accident".
OPTIONAL DEPENDANT CARE BENEFIT
The optional dependant care benefit was introduced as a new option in September 2010 when the caregiver benefit was restricted to people with catastrophic injuries. Unlike the caregiver benefit, which is intended to allow you to hire someone to provide care for a family that you are no longer able to care for because of the accident, the optional dependant care benefit is essentially for working parents whose personal injuries are severe enough that they cannot look after their children. This optional coverage allows them to defray those extra child care costs.
This benefit pays $75 per week for the first dependant in need of care and $25 per week for each additional dependant, to a maximum of $150 per week. This is meant to pay for additional expenses incurred as a result of an accident that arises for the caring for the injured person's dependant, so long as the injured person:
- sustained an impairment in a motor vehicle accident;
- was employed at the time of that accident;
- is not electing to receive the caregiver benefit which was described above.
HOUSEKEEPING AND HOME MAINTENANCE
Prior to September 1, 2010, if you suffered personal injuries in a car crash and could not do your usual housekeeping, you would be entitled to receive payment of up to $100 per week from your insurance company to help defray the cost of having housekeeping assistance come into your home. This benefit lasted for two years from the date of your accident, at which time it was no longer payable, unless the individual suffered a catastrophic impairment in the accident. Effective with the September 1, 2010 changes, however, this housekeeping and home maintenance benefit has been eliminated, unless the claimant has a catastrophic impairment. A new optional benefit replaces the former benefit, whereby a policyholder, at an extra additional expense, can pay for the coverage that used to be part of the standard auto policy, such benefit still being limited to the 104-week time period following the onset of the disability, and a maximum of $100 per week.
MEDICAL AND REHABILITATION BENEFIT
Prior to September 1, 2010, all motorists enjoyed the benefit of $100,000 for medical and rehabilitation needs that might be required as a result of personal injuries sustained in an automobile accident, subject to a 10-year time period for which coverage was available. Effective September 1, 2010, that $100,000 policy limit was reduced to $50,000. It is possible to purchase an optional benefit to restore the $50,000 limit to $100,000. A new "minor injury" category was also created and coverage is limited to $3,500; however, it is not possible to purchase optional coverage to increase your coverage above $3,500. It is possible to purchase an optional medical/rehabilitation and attendant care benefit which provides for $1.1 million for medical and rehabilitation, with no time limit imposed, and a $2 million lifetime cap in the event that the person suffers a catastrophic impairment. Accident benefit lawyers foresee many auto accident victims regretting their failure to purchase additional optional medical/rehab coverage.
OPTIONAL ATTENDANT CARE BENEFIT
Although it is lumped along with the medical and rehabilitation benefit for the purposes of purchasing the benefit, the attendant care benefit is a separate benefit under the Accident Benefits Schedule. Prior to the September 1, 2010 changes, all motorists had coverage for up to $72,000 of attendant care needs during the first two years following an accident. As at September 1, 2010, that coverage was cut in half to $36,000. For an additional premium, the old coverage of $72,000 can be purchased. For a further premium, consumers can purchase an optional attendant care benefit which would provide for up to $1,072,000 in lifetime attendant care, in the event that the person did not have a catastrophic impairment, or up to $2 million if the insured person sustained a catastrophic impairment. These optional benefits can have a tremendous additional value in the event that the most serious of accidents has occurred, often for a relatively modest additional premium cost, but, of course, one always needs to go through the numbers with an experienced insurance broker or agent.
OPTIONAL INDEXATION BENEFIT
The optional indexation benefit indexes the benefits described above, such that they are not fixed or capped at the amounts otherwise specified. For example, a $1,000 optional income replacement benefit would be increased annually according to the indexation provisions, such that it would rise over time, perhaps to something significantly more than $1,000 per week. The indexation calculations are complicated and cannot be reproduced in this short blog. This is an area where a great deal of confusion could arise, even on the part of insurance brokers and agents who might not appreciate the effect that a failure to index a benefit might have on the value of the future stream of a necessary statutory accident benefit.
OPTIONAL DEATH AND FUNERAL BENEFITS
If someone is killed in an automobile accident, the existing death benefit pays $25,000 to the insured person's spouse and $10,000 to each of the insured person's dependants. It is possible to double those amounts, to $50,000 and $20,000 respectively, by purchasing an optional death and funeral benefit. This is one of the lowest cost add-ons that can be purchased, and, as outlined below, the most popular optional benefit.
FEW CONSUMERS PURCHASE OPTIONAL BENEFITS
The Financial Services Commission of Ontario undertook a survey of the largest automobile insurance insurers in Ontario in January 2011. The 24 insurance companies that were surveyed represented more than three-quarters of the Ontario market. The results demonstrate that optional benefits are simply not on the radar screen of most Ontario motorists, the statistics indicating:
TAKE CARE AND BE VIGILANT
This short blog is an introduction to optional benefits, and is not meant to be a substitute for a careful personal review or a meeting with your trusted insurance broker or agent. No one should simply "auto-renew" a policy without giving careful thought, each year, to the changes in life circumstances that might warrant adding or deleting one or more of the available optional benefits.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.