How Third-Party Liability Insurance Works in Canada
Ever wonder what third-party liability insurance involves? Even though this coverage is mandatory for all drivers in Canada, regulations can vary depending on where you live. Here’s a general overview of how it works, what it covers, and other factors you need to know.
To begin, let’s go down the ladder one rung at a time. The first party is the individual who is buying the insurance. The second party is the insurer who is providing the policy. The third party is the individual or organization who intends to file a claim against you.
Essentially, third-party liability insurance protects you against financial repercussions if you are sued for physical injury, death, or damage to someone else’s property. The coverage provides you with the monies needed to pay the third party who sues you for causing the accident.
What is an Example of Third-Party Liability Insurance?
Automobile insurance is by far the most common type of third-party liability insurance. In Canada, it is mandatory for all drivers. In such situations as accidents or otherwise, the coverage will protect the driver (first party) if they cause injury or death to the third party, while the latter will be appropriately compensated. It will also protect the first party if they are found to be at fault for property damage.
Generally speaking, liability insurance will usually cover all costs associated with a lawsuit by the third party in question, even if you are found to be responsible in court. This is important because financial costs often include medical and funeral expenses, death benefits, disability income, and any associated legal fees.
Is Liability Coverage Mandatory?
Yes. All individuals residing in Canada require third-party liability coverage as part of their automobile insurance. Each province and territory sets their own coverage minimums and property damage payment caps. In Ontario, for instance, the minimum coverage is $200,000, though many drivers tend to increase this out of an abundance of caution.
Average Premium Costs
Liability insurance premiums will vary depending on the provider you choose, not to mention variables such as your apparent risk factor. Your age, driving history, location, distance to and from work, and even your vehicle make and model can all contribute towards coverage rates.
What Happens if You Don’t Have Enough Coverage?
You could potentially end up paying out of pocket for any additional expenses above and beyond your coverage limits. This is why it’s important to discuss your specific needs and circumstances with an experienced, dependable insurance broker. They will help you decide whether your coverage is sufficient. Having more is always a better option than not having enough, as you don’t want to risk financial instability if the unexpected happens. For example, consider what would happen if you were driving your kids friends to a soccer game and were involved in a serious accident, and subsequently sued by all the parents of said children. The lawsuit would easily exceed $200,000. If you had increased the limit in advance as a proactive measure beyond this minimum, you would be spared any financial hardship, protecting your household and investments without needing to claim bankruptcy.
If you’re unsure whether you have the right amount of coverage to properly protect you and your family in an accident, don’t worry. Our team at MLS Insurance is here to help with informed, friendly insurance policy assistance. To learn more, get in touch with us today or file a claim.