It’s no secret that new cars lose value fast. In fact, most cars depreciate by an average of 30% in the first two years. If your new vehicle is written off in the first couple of years, your insurance company will usually only pay out the actual cash value (what your car is worth after depreciation), not the amount you paid for it.
That’s where the limited waiver of depreciation comes in. Also known as OPCF 43 in Ontario and QEF 43 in Quebec, this insurance endorsement protects you from that early financial sting by removing depreciation from the payout calculation, but only during the waiver period.
So, is this endorsement worth adding to your policy? It depends. Take our quick self-assessment below to find out if it makes sense for you.
What is a limited waiver of depreciation?
A limited waiver of depreciation is an add-on to your car insurance policy that protects the full value of your car for a specified period after purchase, typically ranging from two to four years. That way, if you get into an accident and your vehicle is deemed a total loss (meaning it’s stolen or damaged beyond repair), your insurance payout will reflect what you paid, not what the car is worth today.
With a limited waiver of depreciation, you will typically receive either the equivalent of:
- The original purchase price,
- The manufacturer’s suggested retail price, or
- The cost of a new, similar vehicle.
For example, let’s say you buy a car for $40,000. A year later, it’s worth $32,000 due to depreciation. Typically, that’s what your insurer would base your payout on if the car is written off, but with a limited waiver of depreciation, you may be covered for up to the original $40,000.
Keep in mind that only the original owner of a vehicle is eligible to purchase a waiver of depreciation. This means that used vehicles, even if they’re only a few months old, are not typically eligible for this type of coverage.
Quiz: Is a limited waiver of depreciation worth it?
If you’re buying or leasing a new car, this quick quiz will help you determine whether it’s worth adding a limited waiver of depreciation to your car insurance policy. Read through each question below, pick the option that sounds the most like you, and take note of each answer.
How new is your vehicle?
A waiver of depreciation is most useful for brand-new cars, where you’re the first owner and depreciation is steepest. If your vehicle is more than 5 years old, its value has already levelled off, so this coverage may not be worth it.
A. Brand new or under 2 years old
B. Around 3–5 years old
C. More than 5 years old
How is your car financed?
This coverage is especially valuable if you’re leasing or financing your vehicle, as you could still owe more than the car is worth if it gets written off.
A. Leased
B. Financed
C. Fully paid off
If your car were written off tomorrow, what would you want to replace it with?
Without this coverage, you may not receive enough in the payout to buy the same car again. That means you’ll either need to pay out of pocket to cover the difference or settle for a cheaper or older vehicle. Is that something you’d be comfortable with?
A. I’d want the same make and model
B. I’d settle for a slightly older or used version
C. I’d be willing to downgrade significantly
How long do you plan to keep your current car?
Vehicles depreciate the most in the first few years, so this endorsement is worth the most during that window.
A. Less than 5 years
B. More than 5 years
C. Undecided
How would an unexpected $5,000–$10,000 loss affect you?
A new car often loses thousands in value within a few years, and if it’s written off, your payout could reflect that loss.
A. It would be a big problem
B. It would be tough, but I’d find a way to make it work
C. I could manage it
Would you be willing to pay a little more for car insurance every month to protect the full value of your car?
This coverage comes at a cost, but so does depreciation.
A. Yes
B. Maybe, depending on cost
C. No
What your answers mean
Before taking a look at your answer, know that this self-assessment is just a starting point, and that there’s no one-size-fits-all answer. Whether a waiver of depreciation is worthwhile depends on factors such as your budget, risk tolerance, and personal preferences.
- If you answered mostly A’s…. A limited waiver of depreciation might be worth it for you. You have a newer car, financial risk matters to you, and you’d want to replace your vehicle with a similar model if it were written off.
- If you answered mostly B’s… You’re somewhere in the middle. A limited waiver of depreciation might be worth it depending on the age of your car, the added cost, and how much risk you’re comfortable with.
- If you answered mostly C’s… A limited waiver of depreciation might be worth it in your situation. If you’re car is older, you’re not picky about what you’d replace it with, and you feel financially prepared to absorb a potential loss, then you might choose to forgo it.
How to add a limited waiver of depreciation
If you decide to add a limited waiver of depreciation endorsement to your car insurance policy, the next step is to check your eligibility. You’ll typically need to provide your vehicle’s purchase date and mileage to confirm that it qualifies.
Once you’ve confirmed that your car qualifies, be prepared for a slight increase in your monthly premium, though the exact amount will vary depending on your insurer.
In any case, it’s always a smart move to compare quotes with YouSet anytime you make changes to your car insurance policy. It helps ensure you’re paying the best price and not missing out on a better deal. Plus, with YouSet, you can get a personalized quote in less than 4 minutes and easily add or remove the limited waiver of depreciation to see exactly how it impacts your rate — no guesswork required.
