Protecting the value of your new car

Posted On Wednesday May 15, 2019

When should I consider adding ‘OPCF 43 - Removing Depreciation Deduction’ to my automobile policy?

You have had your eye on that brand new sedan sitting on the dealership’s lot just down the road from you. It has all the features and besides look at how the sun glints off the hood!

Buying a new car is a big step and once you have it in your possession the thought of it being stolen or having a total loss car accident is furthest from your mind. Unfortunately, these things can happen and having the right insurance coverage will protect your investment.

Did you know?

The most your insurance policy will pay for your car is its actual cash value at the time it was damaged. The value of the loss or damage is based on actual cash value after taking into account depreciation. This means in the event of a claim, insurance pays the lower of the following:

  • the cost to repair the loss or damage; or
  • the actual cash value of the automobile at the time it was damaged.

That makes sense for older cars, but how can you protect the value of your new car?

The Ontario Policy Change Form (OPCF) 43/43a, also known as “Waiver of Depreciation”, is a coverage enhancement you can add to your auto policy at the time of purchase or lease of a new vehicle.

OPCF 43 – option to add to new vehicles (whether financed or not)

OPCF 43a – option to add to new leased vehicles

The Financial Services Commission of Ontario (FSCO) explains OPCF 43 like this:

“This coverage removes the insurer's right to deduct depreciation from the value of your vehicle when settling a claim for loss or damage caused by a peril for which you are insured.”

In other words,

This is replacement cost and waiver of depreciation for your vehicle. This coverage is available to all new vehicles, leased or financed. It removes the insurance company’s right to deduct the depreciated value from your new vehicle in the event of an insured loss.

What Is The Difference Between Replacement Value And Actual Cash Value?

  • Replacement value is the actual amount of money it costs to replace your vehicle without depreciation.
  • Actual cash value is the current cost to repair or replace your vehicle minus depreciation.
    • If you have actual cash value, you will be provided with the value of your vehicle in its current used condition, not the amount it would cost to replace your damaged car with a new car.

How does the OPCF 43 work?

With this endorsement, insurance will pay the lowest of:

  • the actual purchase price, or
  • manufacturer’s suggested list price at the time of purchase, or
  • the cost of replacing your car with a new car of the same make or model and similarly equipped.

It is important to note that your insurance company has the right to choose to repair or replace your vehicle.

There are a few conditions including:

  • You must be the original owner and the automobile must be new at the time of delivery; and
  • Coverage is only available for the first two years you own your new car, and
  • The loss/damage must occur before the policy expiry date

Something to keep in mind:

Economic Depreciation

The OPCF 43/43a does not cover the depreciation associated with a repaired new vehicle.

If your vehicle is involved in an accident and your insurance company repairs the vehicle, no coverage is available for the depreciation in value due to the vehicle being involved in an accident. This may affect resale or trade-in values.

So, before you drive that new vehicle off the lot, speak to your agent or broker about the OPCF 43/43a and whether this coverage is right for you.