What is Third-Party Liability Insurance in Canada?

Accidents are bound to happen, no matter how hard we try to avoid the risks. However, having insurance coverage allows people to live with a certain level of comfort, knowing that the possessions they work so hard to obtain are protected if an accident or natural disaster were to happen.

For example, automobile insurance is a requirement that protects you as the driver and other people on the road in the case of an accident. These policies offer different levels of coverage. Most policies provide a multitude of clauses that can be added to increase your level of protection.

Every Canadian must have an automobile insurance policy that meets the mandatory minimum coverage guidelines, including having third-party liability insurance.  

What is Third-Party Liability Insurance in Canada?

Third-party liability (TPL) insurance protects you if you are involved in an accident where you are partially or totally at fault that results in property damage, injury, or even the death of another person.

Third-party liability insurance is mandatory in all Canadian provinces and territories. This coverage is an addition that must be added to your general liability automobile policy. Automobiles are defined as all vehicles such as motorcycles, cars, trucks, and even snowmobiles.

Premium rates can be affected by several factors, including your geographic location, driving record, vehicle value, safety features, and the average annual mileage you put on the vehicle. Most policies cover you when you rent a vehicle, but you must check your policy to ensure that the option has been selected.

Who does Third-Party Liability Insurance cover?

Third-party liability insurance covers you as a driver as well as anyone you permit to use your vehicle. It would also cover anyone who is a passenger in your car who might sustain personal or property damage due to an accident in your vehicle.

This coverage extends to your family members and even yourself if you are a passenger in your car during an accident. These policies can cover accidents like replacing a business’s signage or equipment and collisions with pedestrians or cyclists. It would also provide reimbursement of legal fees that occurred if a lawsuit was filed against you.

How much coverage do I need?

Every province has different minimum coverage requirements, but all provinces except Quebec require no less than $200,000 in coverage. Quebec only requires $50,000 in third-party liability coverage.

While this is the minimum level necessary to drive legally, what would happen if you were in a severe accident and the damages equaled up to more than what your policy covers? You would be personally liable for that excessive damage and this could bankrupt your family. Most experts agree that coverage limits between $1 million to $2 million should be the default.

Do I need to increase my limits?

Certain circumstances can increase your overall risk, and therefore it might make more sense to increase the coverage limits on your policy. For example, if you cross the border into the United States often, you should carry a higher policy limit.

Similarly, if you live in a busy metropolitan area or use your vehicle to carpool, you should increase your policy limits. There are also additional coverages like a family protection endorsement that can be applied to policies to increase your level of protection.

These optional policies can help increase your coverage level and are often very affordable inclusions to your auto insurance policy. It would be best to work closely with your insurance provider to assess your situation and overall risk level.

What if I don’t have Third-Party Liability Coverage?

Don’t do it! Driving without third-party liability insurance is illegal and not worth the risk. If you are in an accident, you would be personally liable for all damages. You would be personally sued and not only responsible for the damages but also for all of the legal fees. You also could face fines and suspension of your driver’s license.

Do Your Homework

While no one wants to anticipate worst-case scenarios, accidents will happen. If you were to cause an accident that injured someone else or damaged their property, and you do not have enough insurance coverage, you could jeopardize your family’s financial security.

To avoid this, a professional can help you find the best insurance product for your unique situation. Many factors affect the rate of your insurance premiums, and obtaining comparable quotes can help you find the right policy.

Make sure to work closely with your insurance provider to verify all of the benefits of your policy so you know what your insurance policy covers.

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