Getting into a car accident, especially one that isn’t your fault, is already a stressful experience. Imagine if, on top of that, you had to deal with the other driver’s insurance company or even pursue legal action to get compensated for the repairs. Fortunately, direct compensation property damage exists, so you don’t have to do any of that. 

But what exactly is direct compensation property damage? Is it mandatory in Canada? How’s it different from collision coverage? If these are the types of questions on your mind, this article is a must-read. 

Key takeaways

Direct compensation property damage (DCPD) is a type of car insurance coverage that allows you to receive financial compensation if you’re involved in a not-at-fault accident and your vehicle or its contents are damaged. It’s available in most provinces except BC, MB, SK, YT, NWT, and NU. 

What is direct compensation property damage?

Direct compensation property damage, or DCPD for short, is a type of car insurance coverage that allows you to receive financial compensation from your insurer if you are in an accident that is not your fault, and your vehicle or its contents are damaged. It is currently available to drivers in Ontario, Quebec, Alberta, New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island.

As the Financial Services Regulatory Authority of Ontario explains, “It is called direct compensation because even though someone else causes the damage, you collect directly from your own insurer.” The benefit of this is that it simplifies the claims process. Instead of having to pursue the at-fault driver’s insurance company for compensation, you only have to deal with your own insurer.

Not only that, but the Insurance Bureau of Canada points out that thanks to direct compensation property damage coverage, “90% of claims can be settled without any legal action.”

Since this topic can be confusing, here’s an example: Suppose you are rear-ended by someone who was looking down at their phone. Although the crash doesn’t cause you to hit anyone or anything else, it does result in a few thousand dollars’ worth of damage to your trunk. Because you were stopped at a red light and were not at fault, DCPD coverage would allow you to file a car insurance claim with your insurance company and get reimbursed for the cost of the necessary repairs.

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Is direct compensation property damage coverage mandatory?

Besides third-party liability and uninsured motorist coverage, it is common to see direct compensation property damage listed as a mandatory, or at least strongly recommended, type of coverage. However, this will depend on which province or territory you live in. 

• Ontario: Direct compensation property damage coverage is not mandatory in Ontario. As of January 2024, drivers can opt out of it. According to the Ministry of Finance, this change was made to “give drivers more options, which could be useful for drivers of older cars that are worth less than the cost of their insurance.” 
• Quebec: According to the Autorite des Marches Financiers, Section A – Civil Liability Insurance covers “property damage to an insured’s vehicle resulting from a collision where the insured is not liable” and Section A is mandatory in Quebec.
• Alberta: Direct compensation property damage coverage is mandatory in Alberta. However, depending on who your insurer is, you may be able to opt out of it with a “DCPD deletion endorsement.”
• New Brunswick: It is mandatory for drivers in New Brunswick to have direct compensation property damage coverage. 
• Newfoundland and Labrador: It is mandatory for drivers in Newfoundland and Labrador to have direct compensation property damage coverage. 
• Nova Scotia: It is mandatory for drivers in Nova Scotia to have direct compensation property damage coverage. 
• Prince Edward Island: It is mandatory for drivers in Prince Edward Island to have direct compensation property damage coverage.   

Direct compensation property damage vs. collision coverage

Unless you understand the difference between direct compensation property damage and collision coverage, you might be unsure about what your car insurance policy will actually cover if you’re ever involved in an accident. Fortunately, here’s a look at the basic differences between these two types of car insurance coverage.   

Direct compensation property damage

• Only applies when you’re not at fault 
• Covers accidents involving vehicles
• Usually mandatory, but can be opted out of in some provinces (Ontario and Alberta) 
• Cheaper because of its narrower scope of coverage

Collision coverage

• This applies whether or not you are at fault
• Covers accidents involving vehicles or stationary objects (ex. Trees, lampposts, guardrails) 
• Optional, unless required by a lender or leasing company
• More expensive because of its wider scope of coverage 

Next steps

Whether an accident is your fault or not, repairing the damage to your vehicle can be costly, often running into hundreds or thousands of dollars. Fortunately, with the right coverage, insurance can significantly minimize or even fully cover these repair costs. Even better, with YouSet, you can get the coverage you need for up to 29% less.