FSAT: Optional Automobile Accident Benefits

Posted on March 10, 2015 by djb | Posted in General Business Articles

What are Accident Benefits (ABs)?

When an individual is injured in a motor vehicle accident, they may be entitled to claim Income Replacement Benefits (IRBs), as well as various other benefits, from their insurance carrier. Whether the accident was your fault, or someone else’s, you claim benefits through your own auto insurance policy first. If someone else was at fault, and your coverage is not sufficient to cover your losses or costs, you may be able to sue the at-fault driver for the extra amounts.

The Statutory Accident Benefit Schedule (SABS) legislation sets out the maximum benefits available from your insurance company. In addition, increased optional benefits can be purchased if you feel the standard benefits would not be sufficient for your needs. A brief summary of the available benefits and optional benefits follows.

Income Replacement Benefits (IRBs)

The amount of IRBs you are entitled to is based on specific legislated formula 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 legislations contains numerous complicated rules, the overall general approach to the calculation, which has remained unchanged for a number of years, is essentially as follows:

The IRB you are entitled to under the current legislation 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 post-accident 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”.

Optional benefits can be purchased from your auto insurance carrier to increase the $400 per week limit to $600, $800 or $1,000 per week.

Caregiver Benefits

Caregiver benefits are payable to, or for, an injured person who sustains a catastrophic impairment as a result of a motor vehicle accident 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 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. No benefit is payable unless the caregiver sustained a catastrophic impairment.

Optional benefits can be purchased, equal to those set out above, to be paid in the event of a non-catastrophic impairment.

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. No benefit is payable unless the person sustained a catastrophic impairment.

Optional benefits can be purchased to receive up to $100 per week for a non-catastrophic impairment.

Medical and Rehabilitation 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 benefits that can be paid to a person who suffered a ‘minor injury’ is $3,500. For a person whose injury exceeds those set out in the Minor Injury Guideline (MIG), the maximum benefit payable is $50,000 for a non-catastrophic impairment and $1,000,000 for a catastrophic impairment.

Optional benefits can be purchased for up to $100,000 or $1,100,000 of benefits for a non-catastrophic impairment, or $2,000,000 for a catastrophic impairment. However, each of these amounts are subject to combined maximums with attendant care benefits of $1,172,000 for non-catastrophic impairment and $3,000,000 for catastrophic impairment.

Attendant Care Benefits

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 per month to a maximum of $36,000 over two years for a non-catastrophic impairment, and $6,000 per month to a maximum of $1,000,000 for a catastrophic impairment.

Optional benefits can be purchased for up to $72,000 or $1,072,000 of benefits for a non-catastrophic impairment, or $2,000,000 for a catastrophic impairment. However, each of these amounts are subject to combined maximums with medical and rehabilitation benefits, as set out above.

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.

Article by the Economic Loss Quantification Group, previously included in the FSAT newsletter – Spring 2015 (Brent M. Pyper, CPA, CA, CFP)