By: Brad Neal, Published on March 6, 2017 04:46 PM, Last Update on March 7, 2017 08:01 AM
When you’ve purchased optional Accident Benefits coverage. Without them, if you are deemed catastrophically injured in an auto accident in Ontario, your standard coverage could severely limit your access to benefits.
Clearly the Berkshire Hathaway investment is an extreme example, but it underscores the financial implications and importance of knowing what options are available when you purchase Ontario auto insurance. It also highlights the definition of catastrophic injury, which was changed by the Ontario government last year and has yet to be tested in the courts.
Last June, the Ontario Government made significant changes to the auto insurance product. This included a decrease to standard automobile insurance coverage limits as a measure to reduce costs and ultimately premiums. For instance, standard coverage for Medical, Rehabilitation and Attendant Care benefits were reduced by a combined $1 million for a catastrophic injury. So the million-dollar question is, what defines a catastrophic injury?
The easy definition, and one most people can relate to, would be loss of a limb, loss of vision in both eyes, and quadriplegia or paraplegia. The new changes, outlined in Ontario Regulation 251/15, update the criteria for being deemed catastrophic in these three areas.
The fourth area, and where the new definition becomes more difficult to understand, is in the mental and behavioural impairments that result from traumatic brain injuries. While you still require positive evidence of brain injury as determined by a CAT scan or MRI to be deemed catastrophic, last June’s changes included a move from the Glascow Coma Scale (GCS) to the Extended Glascow Outcome Scale (GOS-E).
With the old CGS, there was debate as to timeliness of taking the measurements necessary to determine a catastrophic injury, and there was also some subjectivity with respect to their results. Conversely, the new GOS takes a much longer view of the injuries and their permanence. Without going into a lengthy description of the medical terms, the new definition should apply to any individual that is precluded from “useful functioning” versus their pre-accident state. This change was made to have a more predictable and consistent determination of catastrophic injuries in this area.
In the past, courts had determined that “marked impairment” in one of four mental or behavioural functional areas was sufficient to be deemed catastrophic. With the changes to the Regulations, to be deemed catastrophic now for purely mental or behavioural disorders would require “marked impairment” in three of four areas of function, or “extreme impairment” in one area of function. The new definition has yet to be tested in court and until that happens, uncertainty remains as to the real-life impacts of this definition change. What is clear, is that the bar has been raised on what is deemed a catastrophic injury.
Definition aside for a moment, perhaps even more troubling is that if you haven’t purchased optional Accident Benefits, you have significantly limited your access to coverage by anywhere from approximately $940,000 to $2,000,000. If that limitation is surprising, so is this; the increased coverage can be purchased for approximately $150.*
It is too early to obtain stats on the numbers of people purchasing the optional coverage. For less than $150, I was able to purchase BOTH the $1 million All Injuries coverage as well as the additional $2 million Medical and Rehabilitation catastrophic coverage. This essentially gives me an additional $1 million of coverage if my injuries are deemed non-catastrophic and $2 million of extra coverage if I’m catastrophically injured.
Now back to Berkshire Hathaway. If in 1964, you had made a $150 investment in a class A shares, and held those shares until 2014, they would have been worth approximately $1,497,000.**
I’m sure not many of us purchased those Berkshire shares back in 1964, and I would hope not many of us will ever be deemed ‘catastrophic’ in an auto accident, however, hope is not a strategy. When you consider the “what-if” and the reduced coverage limits now in place, for a nominally-priced policy addon, you can gain the certainty of broader protection; even more than if you had purchased those Berkshire shares – regardless of how ‘catastrophic’ is defined in Ontario Auto insurance.
Contact a Broker today to obtain a quote. You owe it to yourself.
* Costs may vary based on Insurance company and risk factors. Your broker can shop the market and will be able to provide a range of options.
**Damian Davilla “If you had invested right after Berkshire Hathaway’s IPO” Feb 9, 2016. Extrapolated calculation based on evidence presented in the article. Original shares could be purchased for $19.