What Is Liability Insurance on Auto Policies And What Does It Cover?

Feb 12, 2020 2 minute read

What Is Liability Insurance on Auto Policies And What Does It Cover?

One of the most fundamental types of automobile insurance is what is known as “liability insurance.”

This is often the most basic type of auto insurance you can buy. In Canada, liability insurance is one of the mandatory types of insurance. It’s illegal to drive a car on public roadways without having liability insurance.

Why is this? What exactly is liability insurance? What does it cover and what does it not cover?

Let’s take a look.

Liability Insurance 101

To begin with, let’s start with a bit of a vocabulary lesson.

The Oxford dictionary defines liability as:

the state of being legally responsible for something.

Indeed, liability is one of the most important concepts in legal matters. Used in the legal sense, being liable for something usually means that you are responsible for the cost of an item or a service.

When it comes to automobile insurance, liability insurance exists to cover expenses resulting from an automobile accident for which you are at fault.

Being at fault in an automobile accident means that the accident resulted directly from your actions - that is, it was your fault that the accident occurred.

This could mean that you were speeding, driving distracted, made an error in judgement, or any other circumstance where an action you performed directly resulted in a traffic accident.

Just about every traffic accident is going to come with some expenses. Say you caused an accident which resulted in damage to another person’s car. Or an injury to another driver or bystander. Or perhaps even to some surrounding property, such as a business or home.

In this case, since the accident was your fault, you are now liable for the expenses involved in repairing or replacing the vehicle, the other party’s medical bills, or the cost of repairing the damaged property belonging to the business or home.

This is what your liability insurance is for.

It’s easy to see why liability insurance is a mandatory requirement for driving on the roads. Without liability insurance, you can be sued in a court of law for these costs.

Since many drivers don’t have the kind of money to account for these damages, insurance companies assume this burden in order to create a safer environment for everyone who uses the roads.

What Liability Insurance Doesn’t Cover

If you only have the most basic form of liability insurance, your own vehicle won’t be insured in the event that you are found to be at fault in an automobile accident. This is why other forms of insurance are so important. An insurance broker can explain coverages such as third party liability, accident benefit coverage, uninsured automobile coverage and direct compensation-property damage coverage. Depending on what province you live in, these types of coverages may be mandatory.

Want to Know More About Liability Insurance?

We know that the insurance world can seem overwhelming. The good news is you don’t have to do it alone. A BrokerLink insurance broker can explain everything and make sure you have the exact coverage you need. If you have any questions about liability insurance, or anything else in the insurance world, don’t hesitate to talk to one of our brokers.