Accident Benefits – Are You Adequately Covered?
If you are injured in a motor vehicle accident (MVA) you may suffer significant economic losses due to loss of income and/or by incurring costs for medical, rehabilitation, attendant care and home maintenance services and devices.
In Ontario, regardless of whose fault the accident was, you can make a claim for these losses (that aren’t covered by OHIP) through your insurance company. This is commonly referred to as the “no-fault” insurance system. This does not mean that nobody is at fault, or that nobody will be found to be at fault. But rather, it means that everyone injured in an MVA (drivers, passengers, pedestrians) go through their own insurance company to make a claim for damages. (The driver’s insurer would also cover passengers and pedestrians who do not have their own coverage.)
The amounts you are entitled to recover through your automobile insurance in Ontario are limited under specific regulations set out in the Statutory Accident Benefits Schedule (SABS) legislation of the Insurance Act. These limits will be discussed below, but as will be seen, under many situations the benefits available will not be sufficient to cover your loss. In such situations, if the accident is found to be the fault of another person/party, you may be able to sue that party for the additional losses. However, lawsuits can be costly, risky, and lengthy. Although claims under your insurance policy should provide you with cash on a much faster timeframe, they are not specifically designed to ‘make you whole’ (even to the extent that cash alone can do so), even when additional optional insurance benefits are purchased.
The amount of benefits available can also be very different depending on whether you have suffered a minor injury, a non-catastrophic impairment, or a catastrophic impairment.
Income Replacement Benefits (IRBs)
IRBs are designed to replace lost earnings, whether employed or self-employed. The amount of IRBs you are entitled to is based on specific formula set out under the SABS legislation. The formula has changed over the years, with the most recent significant change made effective for accidents on or after September 1, 2010. Although the legislation contains numerous complicated rules, the overall general approach to the calculation is essentially as follows:
The IRB you are entitled to is based on 70% of your pre-accident gross earnings, less 100% of any collateral benefits (i.e. short-term disability (STD), long-term disability (LTD) and/or Canada Pension Plan (CPP) disability benefits) that you are entitled to receive pertaining to the accident. A self-employed individual can then add to this, 70% of post-accident losses that they incurred because of the accident. The resulting amount is limited to $400 per week (unless optional benefits are purchased) less 70% of any postaccident gross employment income earned. The benefit is payable for up to two years providing you suffer a “substantial inability to perform the essential tasks of” your employment, or beyond two years if you suffer a “complete inability to engage in any employment” for which you are “reasonably suited by education, training or experience”.
Based on the above formula, anyone earning an annual income of more than about $29,700 would be entitled to a maximum IRB of $400 per week, or about $20,857 per year (nontaxable), unless optional benefits were purchased.
Optional benefits can be purchased to increase the $400 per week limit to $600, $800, or $1,000 per week.
Therefore, if your annual earnings are greater than $30,000 per year, you should “consider” whether it makes sense to purchase optional benefits. We say “consider” because there is more to the decision. For example, assume a person earns $80,000 per year. 70% of their weekly income would be about $1,077. Therefore it would seem be make sense to purchase optional IRBs to $1,000 per week. However, if this person would be entitled to LTD benefits through their employer of say $4,000 per month (i.e. $48,000 per year, or about $920 per week), their weekly IRB entitlement would be reduced from $1,077 to $157 ($1,077 – $920). Based on this, it may not make sense to purchase additional optional benefits.
Caregiver benefits are payable to or for an injured person who sustains a catastrophic impairment as a result of an MVA and can no longer provide the primary caregiving activities in which they were engaged at the time of the accident. No caregiver benefits are payable if the injured person is also eligible for an IRB. Maximum caregiver benefits are $250 per week for the first person in need of care, plus $50 per week for each additional person. Optional benefits can be purchased, equal to these amounts, to be paid in the event of a noncatastrophic impairment, but only for a period of up to two years.
Housekeeping and Home Maintenance Benefits
The SABS provides that the injured party could receive up to $100 per week for reasonable and necessary housekeeping and home maintenance expenses if, as a result of the accident, the person sustained a catastrophic impairment and can no longer perform the housekeeping and home maintenance services that they normally performed before the accident. Optional benefits can be purchased to receive up to $100 per week for a non-catastrophic impairment, but only for a period of up to two years following the accident.
Medical and Rehabilitation Benefits and Attendant Care Benefits
The SABS sets out lists of medical and rehabilitation benefits that are, and that are not, available to an injured person. The maximum amount of medical and rehabilitation benefits that can be paid to a person who suffered a ‘minor injury’ is $3,500 (plus HST).
Attendant care benefits pay for reasonable and necessary expenses incurred on behalf of the insured person for services provided by an aide or attendant, or by a long-term care facility. The maximum benefit payable is $3,000 (plus HST) per month for a non-catastrophic impairment, and $6,000 (plus HST) per month for a catastrophic impairment. No benefit is payable for a ‘minor injury’.
For a person whose injury exceeds those set out in the Minor Injury Guideline (MIG), the maximum benefit payable for combined medical, rehabilitation and attendant care benefits is $65,000 for a non-catastrophic impairment and $1,000,000 for a catastrophic impairment (plus HST).
Optional benefits can be purchased for up to $130,000 or $1,000,000 of benefits for a non-catastrophic impairment, or $2,000,000 for a catastrophic impairment.
Death and Funeral Benefits
A lump sum death benefit of $25,000 is payable to an eligible spouse and of $10,000 to each dependant. Optional benefits can be purchased to double these amounts.
Funeral expenses will be paid to a maximum of $6,000. Optional benefits can be purchased to a maximum of $8,000.
Optional Indexation Coverage
The limits set out above are fixed. That is, they do not increase each year for inflation protection. However, you can purchase optional indexation coverage, so that certain of the amounts would then be indexed each January 1, for inflation.
Premium Costs for Optional Benefits
Your insurance agent should be ready and able to discuss these optional benefits, and their costs, with you at any time. Our experience is that the costs of these optional benefits, individually, are generally fairly reasonable. However, as more options are added, the annual costs can add up.
Therefore, each item should be considered carefully with relation to your personal needs and situation. In addition, you should readdress these options every few years as your personal circumstances may change over time (for example, your income levels may have increased from when you last reviewed your policy, and so you may wish to reconsider the level of IRB available to you).
We would be pleased to discuss these benefits further with you at any time. Contact a DJB Financial Services Advisory team member.