1. The deductible – You can claim damages from the insurer of the negligent driver. However, your damages for pain and suffering are subject to a deductible, meaning that the negligent driver’s insurance company keeps the deductible and pays you the balance. Until recently, the deductible was $30,000. So, if you are awarded $80,000, the insurance company keeps $30,000 and pays you $50,000. The only exception is if you are awarded more than $100,000. In that case, there is no deductible. So, if you are awarded $110,000, the insurance company will pay you $110,000. Recently, the numbers have changed. The deductible is now $36,540 and will increase each year starting in 2016. So, the $80,000 award will now net you $43,460, just over half of what you were actually awarded. The $100,000 threshold is now increased to $121,799 and will increase each year starting in 2016. So, the $110,000 award will now be reduced to $73,460.
2. Medical and care benefits – You have pretty significant orthopaedic injuries from the accident with multiple fractures requiring various surgeries. You are in hospital for 12 weeks and then are released home. Your home needs some modifications like a ramp and some bathroom renovations to make it safe and accessible for you. You require ongoing physiotherapy. Additionally, a Personal Support Worker (PSW) comes in to help you get up in the morning, bathe, and get your day started.
Until recently, you were insured for $50,000 over ten years for medical and rehabilitation services and an additional $3,000 per month to a total of $36,000 to pay for personal care services. Not any more. Now your benefits are reduced to $65,000 for the medical, rehabilitation and personal care services combined and the medical and rehabilitation benefits now are covered for only 5 years, not 10. Your insurance company, just like the baker, tells you that you could have purchased the same coverage you used to have, but you would have had to pay more for it. Of course, now that the accident has happened, it is too late to get the extra coverage.
3. Catastrophic injuries – Heaven forbid the accident results in something like a spinal cord injury. If you are rendered a paraplegic or a quadriplegic, your home will require extensive renovations to make it wheelchair accessible and safe. You will require ongoing therapy including physiotherapy, massage therapy, occupational therapy and perhaps psychological services. Your physical limitations mean that you will require some level of PSW support on a permanent basis to get you through the day and help you access the community. Until recently, you were entitled to $1,000,000 in medical and rehabilitation benefits and an additional $1,000,000 in personal care benefits. Not any more. Now you are entitled to only half those benefits: $1,000,000 in combined medical, rehabilitation and personal care benefits. Unless you are quite elderly, this funding will not be enough to cover your lifetime needs. You will run out of money. Again, just like the baker, your insurance company tells you that you could have purchased the same benefits that you used to have, but you would have had to pay more for them. Again, now that the accident has happened, it is too late to buy the extra coverage.
4. Interest – You can claim compensation from the other motorist. On some claims, such as pain and suffering, you are entitled to interest up until the day the claim is resolved. Until recently, the interest rate was 5% per year, which was quite good considering current market rates. The thinking behind this level of interest was straight forward: a higher rate of interest will discourage the insurance industry from trying to drag claims out and will make them want to resolve the claim more quickly.
This is not the case any more. Now the interest rate has been slashed to a current rate of 1% per year. Will this rate encourage an insurance company to resolve the claim more quickly? Of course not.
Everyone likes to save money. But just like you do not save money when the baker sells half a loaf of bread for 15% less than what a full loaf used to cost, the people of Ontario are not saving money when the Liberal government of Kathleen Wynne reduces auto insurance rates by slashing insurance coverage. Just like the baker, the only winner in this scheme is the insurance industry. So the next time your insurance invoice arrives in the mail, make sure you understand that while you may be saving a few dollars on your premiums, the insurance industry is saving combined millions in claims they no longer have to pay to injured people, potentially including you.
Our advice: speak to your insurance broker to ensure that you and your loved ones have the car insurance coverage that is appropriate for you and properly insures you in case you should be involved in an accident.