Third-party liability insurance:
What is it?
As a driver, having the right car insurance for your specific needs can make all the difference in the world, but understanding all the different types of car insurance available to you can be a little overwhelming. To help save you time (and hopefully some money!), we’re here to break it all down for you. In this article, we’ll give you lowdown on third-party liability insurance. Read on to find out who needs it, what it covers, and how to get it.
What is third-party liability insurance?
Third-party liability insurance is a type of car insurance coverage that protects you from potential legal and financial consequences if you (or anyone who drives your car with your permission) cause harm to someone else, or cause property damage. Think of it as a safety net that kicks in when you're held responsible for accidents or incidents that result in injury, loss, or damage to others.
While we try to avoid them at all costs, accidents inevitably happen. This type of car insurance provides financial coverage for legal fees and compensation claims, as well as peace of mind knowing that you're protected if something goes wrong. Whether you accidentally crash into someone's car, cause property damage, or are held responsible for someone's injury, third-party liability insurance has you covered.
To put it simply, the biggest difference between liability insurance and other types of car insurance coverages is that liability coverage protects your from being liable for everything around you, as opposed to your vehicle.
What does third-party liability insurance cover, and when should you get it?
Like we touched on before, third-party liability insurance covers a range of situations you may be legally liable for such as causing harm or damage to someone else or someone else's property. This could include:
- Coverage for bodily injury like medical expenses and compensation for pain and suffering, if you injure someone in a car accident.
- Coverage for property damage like repairs or replacement costs, if you damage someone's property like their home, a guardrail or a fence.
- Coverage for legal fees and settlement costs if you are sued for negligence or liability.
Whether you own or lease your car, you should have third-party liability car insurance set up before you even get behind the wheel. In fact, it’s important to know that it’s required by law here in Canada, even if it isn’t in some other jurisdictions around the world.
What doesn’t third-party liability Insurance cover?
Now that we understand what third-party liability Insurance does cover, it’s equally important to note the certain situations or expenses that it doesn’t cover if you’re at fault. These include but are not limited to:
- Repair costs for damage to your own vehicle (you’d need additional coverage like collision or comprehensive insurance for that!)
- Medical bills for yourself or your passengers
- Damage caused intentionally
- Exceeding your policy limits (you may be personally responsible for any remaining costs)
- Claims and incidents occurring outside Canada or the United States (50 states)
- Someone driving your vehicle without your consent
Even though you now know the basics, we still recommend carefully reviewing your insurance policy and consulting with your insurance provider to understand the specific coverage and limitations of your third-party liability car insurance in Canada, and elsewhere!
Is Third-Party Liability coverage mandatory?
The short answer to this is yes. Third-party liability insurance is mandatory for all vehicle owners in Canada. But much like other kinds of insurance, each province and territory has its own minimum required coverage limits.
Here’s the 101: Ontario, Alberta, British Columbia, New Brunswick, Newfoundland, PEI, Saskatchewan, Yukon, Northwest Territories, and Nunavut all have a minimum coverage limit of $200,000, while Nova Scotia and Manitoba are on the higher end with $500,000, and Quebec is on the lower end with $50,000.
How much third-party liability coverage do I need?
While having the minimum is mandatory, you need to consider what’s actually best for you in the context of your own financial situation, and the kind of financial security you want to ensure. Remember that if your claim exceeds the limit in your policy, you’ll have to pay the remaining balance out of your own pocket.
Knowing the kind of financial trouble (or even bankruptcy) this can cause, keep in mind that the more liability coverage you have, the less you’ll be responsible to pay if ever you’re involved in a lawsuit. You certainly wouldn’t want to end up losing your most precious assets as a result.
As a rule of thumb, it’s generally recommended to have a liability limit of at least $1 million on your car insurance policy. This kind of coverage is especially important if you’re ever driving in the U.S. where lawsuits are far more common and costly – not to mention the exchange rate between the US and Canadian dollar!
While this liability limit may sound like a lot of money, it doesn’t necessarily mean your premiums will skyrocket. Your peace of mind is always priceless, so we recommend chatting with a representative at your insurance company to see how much it will cost you to bump up your coverage.
How do you get third-party liability insurance?
While it's mandatory to get third-party liability coverage included with your car insurance policy, you'll still need to decide on the coverage amount you need, based on your unique needs.
And there's no need to navigate this alone! Our advisors are always available to guide you on what third-party liability coverage limit suits you best so that you can drive off with confidence.
Frequently asked questions about third-party liability insurance
Yes, third-party liability insurance is mandatory across all provinces and territories in Canada. It is a basic requirement for all drivers to have this coverage in place before they can legally operate a vehicle on public roads.
Yes, you can increase your third-party liability coverage above the minimum required limits. To change your third-party liability coverage amount on your existing car insurance policy, you should contact your insurance provider directly. They will guide you through the process and help you adjust your coverage to meet your needs. Keep in mind that changing your coverage limits may result in adjustments to your premium, so it's important to review the impact on your insurance costs before making the change. If you have a car insurance policy with belairdirect, you can modify your coverage online anytime!
No, third-party liability insurance does not cover the damages to your own vehicle. It only covers the damages and injuries caused to others for which you are at fault. To protect your own car, you would need direct compensation property damage, comprehensive or collision coverage.
What happens if I'm at fault in an accident and my third-party liability coverage is not enough to cover the damages?
If your third-party liability coverage is not enough to cover the damages, you may be personally responsible for paying for the remaining costs. To avoid being underinsured, it's a good idea to consider purchasing a higher liability limit to make sure you have enough protection.
Third-party liability insurance covers damages and injuries you cause to others, while collision coverage protects your own vehicle. While third-party liability insurance is mandatory in Canada, collision insurance is usually an optional coverage.
Yes, your third-party liability coverage typically extends beyond your home province and provides protection when you drive in other Canadian provinces or territories as well as the United States (50 states). It's always a good idea to check with your insurance provider to understand the specific details and coverage limits when traveling outside your province or country.