From home, commercial, and boat insurance to car insurance and other forms of coverage, third-party liability (TPL) is evidently one of the most important forms of protection Canadians can have. So, what exactly is third-party liability insurance?
To learn more about third-party liability coverage in terms of car insurance, keep reading.
Understanding third-party liability coverage
Third-party liability insurance is a type of mandatory coverage for all motorists in Canada who intend to operate a vehicle on public roads. In short, third-party liability insurance protects drivers in the event they are found at fault for an accident that causes damage to a person's property or bodily injuries to others. Here's a closer look at TPL insurance:
Bodily injury third-party coverage
Third-party liability covers medical costs, rehabilitation costs, lost wages, funeral expenses, and legal fees if you are held responsible for any injuries that occur to a third party as a result of a car accident. Ultimately, this portion of your third-party automobile policy offers financial protection and ensures that you do not have to pay out of pocket for another person's medical expenses.
Further, if you're in an accident that results in the death of a third party, liability insurance will also cover costs related to any settlements up to your policy limits in the event the deceased motorist's family sues you for damages.
Property damage third-party coverage
Suppose you damage someone else’s vehicle or private property, like a fence, home, or other structure. In that case, liability insurance will additionally pay for any repair or replacement costs that result from the property damage. Ultimately, property damage liability coverage is meant to ensure that neither you nor the third party is responsible for paying out of pocket for associated repairs or replacements needed.
Legal liability coverage
Lastly, in the event you are sued by the injured parties, third-party liability insurance covers your legal fees as well. Seeking legal advice for potential legal proceedings can be expensive. However, this includes attorney fees, court costs, and any settlements or court judgements.
How does third-party liability coverage work?
How third-party liability coverage works depends on the policy it’s included with. It is most often found in homeowners insurance policies and car insurance policies. For example, get into an accident that injures someone while driving your vehicle and they file a claim against you. Your policy’s third-party liability section will protect you.
But remember, third-party can also be purchased for other types of insurance such as homeowners, business, and more. So, similarly, if a guest visits your home and injures themselves on your icy walkway or accidentally drives their car into your mailbox, third-party liability coverage will come in handy as well.
What does third-party liability coverage apply to?
Third-party applies to certain circumstances where you are found liable for damages or injuries to another individual or their personal property. Here are some areas where this insurance plan will kick in:
Injuries
Injury is one area where your third-party liability insurance will come into play. We will elaborate on this in the following section:
Medical expenses
The liability portion of your coverage will pay for the cost of any medical treatment other parties may require as a result of the accident. This includes rehabilitation, physiotherapy, medications, and more.
Lost wages If the injured party is unable to work because of their injuries, your insurance can cover their lost income up to your policy limits until they are able to go back to their job.
Funeral costs In the unfortunate event someone is killed as a result of the accident, third-party liability can cover any associated funeral expenses.
Physical damage to property
Physical damage to property is another area covered by your third-party liability insurance. Here’s what it entails:
Vehicle repair or replacements
Your insurance will also cover the cost of any repairs or replacements of the other person's vehicle.
Other damage
If you cause damage to a person's home or any other items or structures on their private property, your insurance will also cover the cost of repairs and replacements.
Legal expenses
Legal expenses are another area covered by third-party liability insurance. Here's what it includes:
Legal defence fees
Liability will cover the cost of hiring a lawyer to defend you if you are sued as a result of the accident.
Court costs
Any costs associated with the legal proceedings involved with the lawsuit will also be covered by this portion of your car insurance.
Settlements
Lastly, your liability also pays for any settlements up to the policy limits if you are found responsible for the damages caused.
Why do I need third-party liability insurance?
Beyond third-party being a legal requirement for all Canadian drivers, there are other reasons why this insurance is an absolute must-have:
Coverage for damages
If you are found responsible for causing an accident with another driver, third-party liability will cover the costs of any property damage and medical bills for the other party. These associated costs can be incredibly expensive. Without this coverage, you would be personally liable for these costs, which can be anywhere between a couple thousand to even millions of dollars in damages.
Legal defence costs
If the other party involved decides to sue you for damages, your insurance policy will cover the legal fees and any settlement costs up to your policy's limits. Remember, legal costs can be incredibly expensive, and having this coverage ensures you have the financial support needed to defend yourself in court without having that entire financial burden on your shoulders.
Peace of mind
Accidents can happen unexpectedly, and the financial consequences that are incurred in the aftermath can be harmful to your overall well-being. Third-party liability is meant to provide you peace of mind, knowing that you are protected against significant financial losses. Ultimately, a third party is like a security blanket that is there to help you feel more confident while you are behind the wheel.
Protects other motorists
As a responsible driver on the road, having third-party liability ensures that any affected parties involved in an accident are compensated for their injuries and property damage. Ultimately, having this insurance is part of being a safe and responsible motorist on Canadian roadways.
Protect your financial interests
Remember all those costs we talked about earlier? Without a third-party plan, you could put your financial health in jeopardy, potentially risking your home, savings, and any other investments you have worked hard for.
Remember, driving without third-party insurance is illegal in Canada. If you are caught by law enforcement without a valid insurance plan, you could face serious consequences, including substantial fines, points on your license, your license being taken away, and vehicle impoundment.
Is third-party already included in auto insurance policies?
Yes, liability insurance is automatically included in all auto insurance plans purchased in Canada, as it is a form of mandatory coverage that all Canadian drivers must have. Here is how this works:
Mandatory insurance policies
Mandatory insurance policies cover the following:
Legal insurance requirements
In Canada, all drivers must have third-party insurance to legally operate a vehicle. This coverage protects all drivers on the road and safeguards their financial health in the event they cause damage or injury to another party.
Minimum coverage
Each province and territory has its own minimum required coverage amount. This amount can typically range from $200,000 to $1 million, depending on where you live. However, the majority of drivers will opt for higher coverage limits for added protection in the event an accident should occur.
Ultimately, when you purchase auto insurance in Canada, no matter which insurance company you choose to work with, third-party liability is automatically included in the basic policy to ensure that you comply with legal requirements set out by your provincial or territorial government.
That said, while the basic policy includes the minimum required coverage, you have the ability to choose whether or not you want to increase your liability limits for additional protection. Just keep in mind that higher limits are recommended, as they offer more financial security in the event of a serious accident, but it will cost you more month-to-month.
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How much third-party liability insurance do I need?
Although third-party liability coverage is mandatory for Canadians, the minimum coverage requirements vary depending on the province or territory in which you live. For example, if you purchase car insurance in Ontario, the mandatory coverage minimum for third-party liability insurance is $200,000, whereas drivers in Nova Scotia are required to purchase a minimum of $500,000 in third-party liability insurance.
It's important to keep in mind that even though the minimum amount is between $200,000 and $500,000, it is often not enough to cover the entirety of repair costs, medical costs, legal expenses, and other associated fees with various claims.
So, to protect themselves from the potential risk of damaging someone else's property or causing them injury, most motorists opt to increase their minimum amount of liability coverage to $1 million to ensure they are comprehensively protected.
If you're unsure about the auto insurance rules in your province or territory or have questions about how much additional protection you should purchase, we recommend reaching out to your insurance provider directly for further information.
How can I buy third-party liability insurance?
To buy third-party liability insurance, here's what you need to do:
- Consider your insurance needs: First, evaluate your insurance needs. Make sure you know what the minimum requirement is for third parties in your area and consider what types of insurance you want to have as a motorist.
- Shop around for policies: If you live in an area of Canada with private insurance regulations, you'll be able to shop around and compare insurance quotes from different providers. By doing so, you can find the best deals and policies that match your unique needs.
- Choose your insurance: Now, you'll be able to choose your insurance plan. When doing so, you'll be able to pick your policy limits, deductible amounts, and other add-on policies you might want to purchase. When looking at your plan, you'll also need to take note of what is and isn't included to ensure you have full coverage.
- Purchase your policy: Now that you have chosen your specific policies, your insurance provider will calculate your monthly premium. Don't forget to ask your provider whether or not you qualify for discounts, as it can help you save on your insurance costs.
- Maintain your insurance: Lastly, you'll need to maintain your plan and take note of when it's time to renew your insurance in the future. Set reminders on your phone so you never go without coverage when you're behind the wheel.
If you're still unsure about third-party coverage or car insurance in general, we recommend reaching out to your insurance company directly to speak with an agent. Alternatively, you may find working with a broker more advantageous.
Because brokers work independently, they'll be able to help you shop around for the best coverage available. They can also provide unbiased advice on certain policies and providers, given that they don't work for one single company. Additionally, working with a broker also allows you to customize your insurance coverage so you can get a plan that completely works for your unique needs and driving habits.
How much does third-party liability insurance cost?
Purchasing third-party liability insurance is different for everyone, including how much it costs. In fact, there are many factors that determine how much your premium costs. Here's a closer look at how what you'll pay for coverage is calculated:
What province or territory do you live in
Car insurance costs vary significantly by province or territory, given that each has different insurance regulations. Another determining factor related to location is whether you live in an urban area or a rural one.
Because big cities have higher crime rates, traffic, and other potential risks, generally speaking, you'll pay more for your insurance compared to someone who lives in a quieter area.
Your driving history
Your driving record is another important factor used by insurance companies when calculating the cost of your premiums. Insurers will look for any past traffic violations, at-fault accidents, and insurance claims you may have filed.
A clean driving history with no accidents or tickets typically results in lower premiums compared to those who have multiple violations on their record. This is because insurance companies view these types of drivers as being higher risk to insure, meaning they're more likely to cost them money in the future compared to someone with no violations.
Your age and gender
Young drivers often pay more than seasoned motorists due to their lack of experience on the roads. Similarly, your gender can also impact rates, with young men typically paying more than females, given that historical data shows young men as more of a risk to insure.
The make and model of your vehicle
The type of vehicle you drive will also significantly impact your insurance premiums. High-performance or luxury vehicles typically cost more to insure than standard cars with lower repair and replacement costs.
What coverage limits you choose
While higher coverage limits on your third-party liability insurance will offer you more protection against road hazards, it'll also cost you more money.
The deductible amounts you purchase
Your deductible is the amount of money you pay out of pocket when filing an insurance claim before your insurance kicks in to pay the rest.
While opting for a higher deductible may lower your monthly average cost for insurance, keep in mind that you'll be responsible for paying more money out of your own pocket in the event you damage your vehicle.
Whether you qualify for any discounts
Most insurance companies offer a range of discounts to customers. Common discounts include having a clean driving record, equipping your vehicle with safety features like winter tires and anti-theft alarms, being a member of a professional association, bundling your policies, and more.
So, the next time you're up for an insurance renewal, make sure to ask your insurance provider whether you qualify for any savings.
What policy you purchase
Lastly, the type of coverage you choose will also play a role in how much you pay. While third-party liability coverage, accident benefits, uninsured drivers, and direct compensation property damage are all legally required policies, there are additional auto policy options available to purchase.
For example, many Canadian drivers choose to add collision and comprehensive coverages to their overall auto insurance portfolio. These policies protect your personal vehicle and belongings in the event property damage is caused by covering repair costs and any replacements that may be needed.
If someone hits my vehicle, does third-party liability coverage protect me?
No third-party liability coverage does not protect you in the event another driver or person causes injury or damage to your vehicle. Third-party liability insurance only provides financial assistance in the event you are found at fault for injuries or damages.
However, this doesn't mean that you'll be left to pay for any medical coverage and any remaining costs on your own. You'll need to have different types of insurance, which we've outlined for you below:
- Collision coverage: As we briefly mentioned, collision insurance will cover any of the repair or replacement costs associated with damage to your vehicle, no matter who is found responsible for the damage.
- Uninsured motorist coverage: Uninsured motorist coverage provides drivers protection if they get into an accident with someone who does not have enough third-party liability insurance or no insurance at all. It also provides coverage if you are involved in a hit-and-run accident where the other driver flees the scene.
- Fault driver's insurance policy: Lastly, you can also file a claim with your insurance company if you've been in an accident, and the other party's insurance will pay for any direct claims incurred if you suffered a personal injury or other damages.
Do I need liability insurance to rent a vehicle?
Yes, liability insurance in Canada is mandated by law. In a lot of cases, car rentals in Canada will include some basic coverage for third-party liability. Depending on your insurance company and the specific auto policy you have, you may already have liability insurance that extends to renting a vehicle.
When renting a car, it's important to take a look at the policy limit provided by the rental company to determine whether or not you wish to purchase additional coverage. It's also important to mention that the insurance policy provided by the rental company may not include collision or comprehensive coverage. . Again, make sure you speak with the rental company to ensure you know exactly what you may be liable for before signing any contracts.
Contact BrokerLink today!
BrokerLink is a leading brokerage in Canada with years of experience helping customers find affordable auto insurance that meets their unique needs and budgets.
With locations across the country, there's a chance we might be in your neighbourhood! To work with an insurance broker in person, feel free to visit us at one of our locations. If you can't make it into our office, give us a call at any time to speak with someone over the phone.
Alternatively, you can also use our free online tool to get competitive third-party liability auto insurance quotes from the comfort of your own home!
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