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What Is Third-Party Liability Car Insurance and What Does It Cover?

March 19, 2021
6 mins
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There is only one thing worse than getting into a car accident, and that’s injuring someone else or damaging another person’s property.

A car accident can happen to anyone, even to the most cautious drivers. Suppose it happens to you, and you are found to be at fault for the collision. In that case, one of the mandatory coverages in your car insurance policy, called third-party liability insurance, is triggered. It’s a critical portion of every auto policy in Canada that protects the insured driver and owner of the vehicle if the vehicle injures or kills someone or damages someone’s property. There are other types of coverages in a basic or mandatory Ontario or Alberta auto policy and optional coverages you can include.

Third-party liability auto claims payouts accounted for 47.1% of all direct claims incurred in 2019, according to the Insurance Bureau of Canada’s (IBC) “2020 Facts of the Property and Casualty Insurance Industry in Canada” report. Furthermore, the vast majority of claims – 83.5% – were for incidents involving private passenger vehicles.

Beyond paying for injuries or damages, third-party liability also includes coverage for legal fees if you are sued for damages by other drivers, or by a passenger in your vehicle who is hurt at the time of the accident.

What does third-party liability car insurance cover?

Third-party liability insurance will pay for any of the following:

  • The medical and rehabilitation costs of another driver or anyone you have injured, including a pedestrian or cyclist.
  • The repair bill for other drivers’ vehicles damaged in a collision that you caused.
  • The costs to fix any property you damaged in an accident such as a fence or if your car careens into a building.
  • Legal fees to defend yourself if another person sues you and the amount awarded through a lawsuit to those injured.

Third-party liability insurance does not pay for any injuries you suffer in a collision or to get your vehicle repaired when you are at fault. If you are injured in a crash, it’s the accident benefits portion of your policy that covers your medical bills. Optional collision coverage pays for fixing your car provided you have it, less a deductible. The amount of your deductible depends on what you choose when purchasing a policy. Many drivers select either a $500 or $1,000 deductible.

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What is the minimum third-party liability car insurance coverage in Ontario?

In Ontario, $200,000 is the minimum mandatory liability amount available for any one accident. However, suppose a claim involving both bodily injury and property damage reaches this figure. In that case, payment for property damage will be capped at $10,000.

The minimum $200,000 worth of coverage sounds like a lot, but it may not be enough. For example, if another driver suffers a debilitating, catastrophic injury, that $200,000 will not go far. If your policy only carries the minimum amount, once those funds are exhausted, you are on the hook to pay the rest of the costs yourself. That could push you into bankruptcy.

But you can increase the third-party liability coverage in your policy to $500,000, $1 million, or as high as $2 million. It’s worthwhile to talk to your broker or insurance provider to get their recommendation on how much liability coverage you should carry.

What is the minimum third-party liability car insurance coverage in Alberta?

In Alberta, $200,000 is the minimum mandatory liability amount available for any one accident; however, if a claim involving both bodily injury and property damage reaches this figure, payment for property damage will be capped at $10,000.

Alberta drivers carrying the mandatory minimum liability coverage on their policies face the same risks as motorists in Ontario should another driver’s injuries be catastrophic for an accident in which they are at fault. That’s reason enough to talk to your broker or insurer and inquire about whether you should increase your liability coverage.

What is the minimum third-party liability car insurance coverage in other provinces and territories?

Outside of Ontario and Alberta, the minimum mandatory liability amount varies from one jurisdiction to another:

  • British Columbia: $200,000 is available for any one accident. If a claim involving both bodily injury and property damage reaches this figure, payment for property damage will be capped at $20,000.
  • Manitoba: $200,000 is available for any one accident. If a claim involving both bodily injury and property damage reaches this figure, payment for property damage will be capped at $20,000.
  • New Brunswick: $200,000 is available for any one accident. If a claim involving both bodily injury and property damage reaches this figure, payment for property damage will be capped at $20,000.
  • Newfoundland and Labrador: $200,000 is available for any one accident. If a claim involving both bodily injury and property damage reaches this figure, payment for property damage will be capped at $20,000.
  • Nova Scotia: $500,000 is available for any one accident.
  • Northwest Territories: $200,000 is available for any one accident. If a claim involving both bodily injury and property damage reaches this figure, payment for property damage will be capped at $10,000.
  • Nunavut: $200,000 is available for any one accident. If a claim involving both bodily injury and property damage reaches this figure, payment for property damage will be capped at $10,000.
  • Prince Edward Island: $200,000 is available for any one accident. If a claim involving both bodily injury and property damage reaches this figure, payment for property damage will be capped at $10,000.
  • Quebec: $50,000 is available for any one accident. Liability limits relate to property damage claims within Quebec and personal injury and property damage claims outside Quebec.
  • Saskatchewan: $200,000 is available for any one accident. If a claim involving both bodily injury and property damage reaches this figure, payment for property damage will be capped at $10,000.
  • Yukon: $200,000 is available for any one accident. If a claim involving both bodily injury and property damage reaches this figure, payment for property damage will be capped at $10,000.

Source: IBC, “2020 Facts of the Property and Casualty Insurance Industry in Canada”.

How much third-party liability car insurance coverage should you have?

According to IBC, the average cost of a third-party liability auto claim in Canada was $13,715 in 2018. It could be a much higher sum depending on the accident and how severe the injuries are to those involved, and the damage to other drivers’ vehicles.

When determining how much liability coverage you should get, ask yourself:

  • Do you commute to work or use your vehicle to do your job?
  • Do you live in a large city or travel on highways with high traffic volumes?
  • When COVID-19 restrictions end and the Canada-U.S. border reopens, do you often drive to the U.S.?
  • Do you typically have passengers in your car or carpool with others?
  • Do you have the money to cover the cost of damage to others if they exceed your existing policy’s limit?

The cost to repair vehicles nowadays isn’t cheap – for example, one Mississauga woman was told it would cost her $7,000 to fix the headlights on the Mercedes she was leasing recently. Moreover, if you’re sued by someone seriously injured by an accident you caused, the lawsuit settlement could skyrocket beyond the minimum amount in a standard car insurance policy. Think it through and chat with your broker to determine if you should up your policy’s third-party liability limit.

Liam Lahey

Liam Lahey is a versatile, seasoned writer and editor. He worked as both a staff writer and freelance writer for many business and technology publications as well as for several newspapers. He writes about home, auto, and travel insurance, and is a media spokesperson for RATESDOTCA.

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