How Ontario's July 1, 2026 auto insurance reforms affect drivers and non-drivers

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Whether you’re a driver, passenger, or pedestrian involved in a vehicle accident, Ontario’s newly launched auto reforms, effective July 1, impact you either directly or indirectly. Prior statutory accident benefits are now offered as options to insured and listed drivers on an auto policy, along with spouses, and dependants. Income replacement, home maintenance costs, and payouts tied to inflation are important insurance considerations that impact anyone caught in an unexpected vehicle mishap. Whether you’re a student, parent, grandparent, primary caregiver, employee in any profession, or self-employed, Ontario’s auto insurance reforms can significantly affect you if involved in a road accident without protection of these non-mandatory insurance benefits.

Understanding what risks you face on the road, implications of opting out of coverage, and questions to ask your insurer about Ontario’s auto reforms can prevent you being underinsured in case of an accident.

Which auto insurance coverage is mandatory vs. optional after July 1?

Under Ontario’s new rules, some accident benefits for the insured policyholder, spouse, dependents, and listed drivers remain mandatory while some benefits have moved under Ontario’s 'a la carte' options.

Optional benefits automatically roll forward as part of your policy if you choose not to cancel them. These benefits cover everything from income loss to family expenses, home support, education impacts, and end of life costs. While drivers have more choice, they also need to pay closer attention to what is included in their policy, says Steven Harris, licensed insurance broker and LowestRates.ca expert. Harris is concerned that some people could opt out of benefits without fully understanding what they are giving up, then only realize after a collision that certain supports are no longer included. 

How do optional accident benefits protect drivers and non-drivers?

Optional accident benefits compensate drivers and non-drivers if an accident prevents them from earning an income or burdens them with unexpected costs. The impact of these changes "can also extend beyond the driver", Harris says. "Passengers, pedestrians, and family members can be affected differently depending on the accident and the insurance policy that applies to them."

Some optional benefits can help with costs after a serious injury or death, including caregiver support, dependent care, housekeeping, visitor expenses, and death and funeral support. "If those benefits are removed, families could be left paying for support they expected to have covered," Harris cautions. 

Income Replacement Benefit

An income replacement benefit substitutes some, or all, of your missed salary payments if hurt in an accident and unable to work. While you recover from a road crash and stop making money, these payouts help with your bills and expenses. The coverage protects you if you depend on your job income and do not have sufficient workplace benefits to replace lost revenue in the event of an injury related to a car accident.

Caregiver Benefit 

If injured in an automobile accident, a caregiver benefit pays someone to take over your responsibilities as a primary caregiver for children, disabled siblings, or elderly dependents while you are incapacitated. These benefits help care for those who need you, even when you require time to recover from an unexpected road injury.

Non-Earner Benefit (NEB)

For students, retirees, or stay-at-home parents without employment income at the time of a car accident, a Non-Earner benefit helps cover everyday expenses. This benefit isn’t based on income, so it’s designed to provide cashflow even if you didn’t have a job at the time of the crash. If your injuries stop you from living your normal life, your insurance can provide regular support for a set period after a short waiting time. 

Housekeeping and Home Maintenance 

Pays for hiring help for chores when accident injuries make them impossible. For seniors or single parents without nearby support, housekeeping coverage is a great option to support you complete household tasks during debilitating injury.

Death and Funeral Benefits 

Provides financial support to your family for funeral costs if you pass away from a vehicle accident. Funerals are costly and this coverage helps lift the financial burden of an unexpected funeral in otherwise tragic circumstances. Lump sums of cash to family can help with debts or other financial commitments. 

Indexation Benefit

Indexation increases insurance payouts linked to cost-of-living inflation. If you’re injured in a car accident and receive weekly payments or coverage for medical bills, those benefits might last for years. Without indexation, the amount stays the same while prices go up – meaning your money buys less over time. 

Adding indexation to your policy means your payments and coverage limits automatically increase every January based on inflation. For example, $400/week today becomes $408 next year if inflation is 2%, instead of staying stuck at $400 forever. 

What are risks of opting out of benefits?

Risks of not having various insurance benefits in the event of an accident can be understood through the lens of accident impact scenarios.

Accident impact scenarios:

How do I know if my insurance includes optional benefits?

Your current accident benefits package simply rolls forward with optional benefits that were previously mandatory, if you don’t make any changes. If you decide to drop some coverage, you can always change your mind and re-add options or further enhance your injury coverage to financially protect you and your family after an accident. When shopping for a new policy, insurance experts strongly recommend you avoid underinsuring at purchase. Always talk to a broker to find the product that suits your circumstances and can protect you from potential financial devastation.

Stay informed of the implications of newly rolled out auto insurance reforms in Ontario and be aware of your risks if you cancel optional coverage.

Will Ontario's optional insurance model drive up claims and premiums? 

"It is too early to know exactly how this will affect claims or premiums over time," says Harris. Premiums are affected by a lot of factors, including claims costs, repair costs, and broader market conditions. "The new model gives consumers more flexibility, but it will take time to see how many people opt out and how that affects coverage decisions, claims patterns, and pricing over time." 

"For most people, the decision should not come down to finding the cheapest possible premium. It should come down to whether they would be comfortable going without those benefits if they, a passenger, or someone in their household were seriously injured in a collision.

Auto insurance reform FAQs

Will my insurance actually be cheaper if I cancel optional coverage? By how much?

Yes. By reducing coverage initial costs will be very slightly decreased. Insurance costs as a whole are a reflection of claims levels, and other items may cause spikes in rates that easily offset savings from minimizing or removing optional benefits – which is why this is not recommended.

Is opting out worth the risk?

Not in most cases. If cutting coverage will have a meaningful impact on your monthly budget, then not having that assistance when required could be financially perilous for you. The savings are usually not significant in Harris' opinion. "Optional accident benefits make up about 5% of the premium, so drivers should look closely at what they are removing before deciding whether it is worth it," says Harris.

How do Ontario auto insurance changes interact with my workplace benefits?

When a claim is made, your auto insurer pays first. Instead of burning through your workplace benefits right away, your claim goes through your auto policy first. You’re way less likely to drain your employee plan. It also tends to move faster because insurers are set up to handle these situations efficiently.

Who pays first for medical treatment after a crash now?

Your auto insurer pays first for medical treatment after a crash. Workplace benefits only step in after your auto benefits are used – essentially acting as excess coverage. This is a reversal from how it worked before.

What happens if I’m seriously injured and don’t have optional benefits?

You have to pay out of pocket, which could exceed six figures in financial loss.

Do the new July reforms change what information I should exchange or what I should do if I'm in an accident?

No, the new guidance does not change the steps you follow in the event of an accident.

What happens if I hit a pedestrian without insurance? Will they sue me personally? Will I have to pay for legal fees?

Yes, you could possibly get sued by a pedestrian who doesn’t own a car and doesn’t have accident insurance, and have to pay for legal fees.

What happens if I don't have auto insurance? Will my home insurance cover me if I'm in an accident?

No. Home insurance excludes motor vehicle accidents entirely, because cars require a separate auto policy by law in Ontario. Home insurance won’t cover your liability, your injuries, or any damage to the vehicle. At most, home insurance might cover some personal contents inside of the car, such as damaged belongings, but nothing related to the actual accident itself or the person you may have injured.