Optional No-Fault Benefits: How Much Is Enough?
On June 1, 2016, the Standard Accident Benefits that are available under all motor vehicle insurance policies in Ontario underwent significant reductions. These reductions applied to all policies that were renewed after June 1, 2016 so your current benefits are at the reduced levels unless you purchased enhanced Optional Benefits.
The reductions in standard Accident Benefits are significant. In order to ensure that you fully understand how your benefits have been reduced you will want to meet with your insurance intermediary (broker or agent). Your insurance intermediary gets paid for selling you the insurance you need. Every time you renew your auto insurance they are going to earn their commission by taking the time required to ensure that you have the optional benefits that you need.
How do you know whether the reduced Standard Accident Benefits are sufficient for you and your family? How can you determine whether you should purchase some or all of the Optional Benefits that are available? Perhaps the following information will be of assistance to you. I encourage you to contact your insurance intermediary and arrange a meeting to discuss your motor vehicle insurance needs. You should do this now, before you are in an accident and find out that you do not have the insurance benefits you need.
Income Replacement Benefits (IRB’s)
IRB’s are calculated at 70% of gross income, with the standard benefit capped at $400 a week. Optional benefits can increase the weekly amount to $600, $800 or $1000. If you do not have disability insurance (and perhaps you should), you should consider whether or not you need to buy optional IRB’s. For example, a person with a gross weekly income in excess of $600 may wish to opt for $600 in IRB’s. Similarly, an income greater than $900 a week might warrant the purchase of the $800 benefit. Finally, an income in excess of $1,500 may justify purchasing a benefit of $1000 a week.
The standard Caregiver Benefit pays $250 a week for the first child and $50 a week for each additional child if the injured person has sustained a “catastrophic impairment”. The optional benefit makes these amounts available even if the injured person does not suffer a catastrophic injury. However, the benefit is not payable for more than 104 weeks unless the injured person suffers a “complete inability to carry on a normal life”. The optional benefit may be appropriate for people who have good long-term disability insurance and who will not be claiming an IRB. An example would be someone who is caring for young children or a disabled person.
Housekeeping & Home Maintenance Benefit
The standard Housekeeping & Home Maintenance Benefit will pay $100 a week but only if the injured person sustains a catastrophic impairment. The optional benefit makes this money available even if the injuries are not catastrophic but are not available for the first 104 weeks after the onset of disability. The optional benefit may be attractive to people who are involved in maintaining their home or property and who do not have a third party (spouse, child, or parent) available to assume these responsibilities without pay. But consider what would happen if that other person is injured in the same accident and was not able to carry out these tasks?
Medical/Rehab & Attendant Care Benefit
These are the Accident Benefits that my clients use the most and that make the biggest difference in the rate at which they recover and the level of recovery that they achieve. Prior to June 1, 2016, there was a limit for Med/Rehab of $50,000 and a further limit for Attendant Care of $50,000. Now these benefits have a combined maximum of $65,000 for non-catastrophic injuries and are only available for five years. If the injuries are catastrophic, the combined total benefit is $1,000,000 and there is no time limit. There are three optional med/rehab and attendant care benefits:
· An increased combined benefit of $130,000 for non-catastrophic injuries;
· A combined benefit of $1,000,000 for all injuries; or
· An additional benefit of $1,000,000 if the injuries are catastrophic.
The maximum Med/Rehab and Attendant Care Benefit if all options are purchased is $1,000,000 for non-catastrophic injuries and $3,000,000 if there is a catastrophic impairment. Not only does purchasing optional Med/Rehab and Attendant Care Benefits increase the benefit amount, it also eliminates the maximum 104 week benefit period.
The maximum optional benefits are appropriate for anyone who is seriously injured in a motor vehicle accident; and nobody can predict who that will be. In my experience the standard $65,000 is insufficient for what many of my clients’ experience: many years of treatment, rehabilitation and attendant care. Living without sufficient attendant care financing can be particularly difficult for someone who does not have a family member to provide attendant care for free. Once again, consider a situation where more than one family member is seriously injured and needs attendant care. Who would be available to attend to more than one disabled family member; for free?
Based on available information, it seems that increasing the combined Medical/Rehabilitation and Attendant Care limit for non-catastrophic injuries from $65,000 to $130,000 may cost less than $50 a year. Increasing this coverage to the maximum available of $1 million may cost under $70 a year. Increasing coverage for catastrophic injury from $1 million to $2 million may only cost about $40 a year. You may find that for about $150 a year you can increase your coverage to the maximum now available.
Death and Funeral Benefit
The standard benefit of $25,000 for a surviving spouse can be increased to $50,000. The standard benefit of $10,000 for each dependent can be increased to $20,000. If there is no surviving spouse, the standard benefit of $25,000 for dependents can be increased to $50,000. The $6,000 available for funeral expenses can be increased to $8,000. The increased death and funeral benefit can be important if the deceased had insufficient life insurance. It can also provide financial support while surviving members of the family take unpaid leave from work.
Dependent Care Benefit
This benefit is only available as an option. It covers the additional costs incurred caring for dependents. It pays up to $75 a week for the first dependent and $25 per week for each additional dependent up to a maximum of $150 a week. It is important to note that a person is a “dependent” only if the person is primarily dependent for financial support or care on the individual or the individual’s spouse. This means that in-laws are dependents if the insured’s spouse provides financial support or care for them. They do not have to live with the insured person.
This benefit is not available if the claimant is unemployed at the time of the accident or is receiving a Caregiver Benefit.
This benefit could be attractive to anyone who would otherwise benefit from the Caregiver Benefit but has opted to take IRB’s because they do not have any long term disability insurance. Examples would include working parents with young children or working people with elderly parents they support financially or care for.
The optional indexation benefit applies to Income Replacement Benefits, Non-Earner Benefits and the outstanding balance of the Med/Rehab & Attendant Care Benefit. The indexation occurs each January 1st by the percentage change in the CPI. Indexation could be important for claimants who will be accessing benefits for many years. Consider families with young children. Also consider the increasing life expectancy of all of us.
Who Qualifies for Optional Benefits
If optional benefits are purchased they are only available for:
· the named insured;
· the spouse of the named insured;
· the dependents of the named insured and spouse; and
· the drivers specified in the policy.
The restriction on accessing optional benefits means that some people driving or riding in your car will not be able to access them. This would include an ex-spouse, independent children and guests. This also means that you may not have access to optional benefits in someone else’s policy should you be injured while an occupant of their motor vehicle. However, you will be able to access the optional benefits you purchased.
Renewing Your Car Insurance
Whenever renewing your car insurance you will need to review with your insurance intermediary whether there have been changes in your circumstances such as:
· an increase in your income;
· new or discontinued disability insurance;
· the arrival of a new child;
· the existence of a new dependent;
· the purchase of a new home with new housekeeping responsibilities;
· the loss of a person who would otherwise be able to provide housekeeping or attendant care in the event you were injured.