Car accident benefits – It is time to pay attention to your auto policy!

By Roger Foisy on October 7th, 2010

Car accident benefits have been slashed up to 50% and some benefits have been eliminated — how will accident victims be able to cope?

My clients almost always tell me that before their car accidents, they thought insurance was both boring and confusing. For these reasons they decide to put their insurance coverage at the bottom of their priority list.

This fall, car insurance is moving from the back burner to the front burner. Despite the confusing nature of the insurance contract itself and whether or not anyone could ever spare the time to read all of the fine print contained within an insurance policy, here is what everyone needs to pay attention to:

1. $100,000 in medical/rehabilitation accident benefits shrinks to $50,000.

The Ontario Government has slashed medical and rehabilitation benefits paid to car crash victims of “non-catastrophic” cases from $100,000 to just $50,000. It has also reduced attendant care benefits from $6,000 per month to $3,000 per month and has eliminated housekeeping and home maintenance benefits altogether.

In my experience, as a personal injury lawyer, the costs of medical and rehabilitation treatment will frequently exceed $50,000. So, where will that leave car accident victims who have not yet fully recovered? Many forget that since 2005, OHIP has not covered the costs of physiotherapy and chiropractic care. Most employment benefits plans cover an annual maximum of $500 for medical and rehabilitation treatment. Ask yourself how you would be able to cope if you were still recovering and your $50,000 medical and rehabilitation benefits were exhausted from your own auto insurer?

Of course, you will still be able to get $100,000 of coverage—it will just need to be opted for before the car accident and of course it will cost you more.

2. Carefully examine the ‘income replacement benefit’ clause of your policy.

Here’s how this clause now works for accidents which occurred on or after September 1, 2010:  if you were unable to return to work after a car accident, a standard auto policy today will pay you 70 per cent of your gross income, but only up to a maximum of $400 per week. For example, if you earned $75,000 per year, 70 per cent of your gross weekly salary would be approximately $1,009.00 per week, but your insurance policy would only pay you the maximum of $400 a week.  You are left with more than a $600 loss per week.  Even if you factored in the taxes for which you are responsible, there would still likely be a $300-$400 loss per week.

So what type of benefits does our government provide for accident victims? According to the Financial Services Commission of Ontario, the $400 weekly benefit has been in place since 1996. According to Brown Economic Assessments calculator, $400 in 1996 brought to today’s (Jan 2010) dollars amounts to $524 per week. So why has this change not been reflected in the new regulation?

The only good and bad news is that this benefit can be increased but for a minimal cost. For about $200-$250 extra a year the same person earning $75,000 would then be paid $800 – $1,000 a week if they were injured and unable to work. Over a one year period, this $200-$250 cost would provide you with an extra $20,000 -$30,000 yearly income replacement.

3. Get a magnifying glass and read your existing auto insurance policy.

Is it just coincidence that insurance policies are written in hard to read small fine print? What we do know for certain is that insurance companies are in the business of making money for their shareholders by collecting premiums. Paying out claims is no source of revenue for insurers.

So, read your policies, and call up your insurance agent or broker and ask what these clauses actual mean and how they may affect you if you become a victim of an unfortunate motor vehicle accident. The Financial Services Commission of Ontario publishes an information brochure entitled: Understanding Automobile Insurance.

The next six months will shine spotlights on insurance companies, on their direct regulators, and on the politicians who oversee both the insurance industry and the health care industry.

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