Third party liability insurance is one of the most important types of coverage out there. That is why you’ll find it popping up in everything from home insurance and auto insurance to commercial business insurance policies. This type of coverage is the portion of a policy that covers any claims resulting from bodily injury to another person or property damage to another person’s property.
It is sometimes referred to as legal liability coverage because it covers legal fees, lawsuit settlements, court fees, and any other associated legal expenses, such as lost income, medical expenses, or travel expenses arising from the lawsuit. Keep reading to learn more about third party liability insurance, including why it’s so important and how much coverage you need.
Why do I need third party liability insurance?
Accidents happen, even when you take all the proper precautions. Third party accidents are exactly what liability coverage protects against. If an accident results in serious injury or property damage, it could lead to a lawsuit. As we all know, lawsuits can be incredibly expensive, which can have serious financial implications for you, your family, or your business.
Most people cannot afford the costs of a lawsuit, which range from court and legal expenses to settlement fees. But with third party liability insurance coverage, you won’t have to pay these costs alone for a covered incident, rather, under this portion of your policy, your insurance provider will help pay the costs incurred by a lawsuit. This is one of the main benefits of third party liability insurance.
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, if you get into an accident that injures someone while driving your vehicle and they file a claim against you, it’s the third party liability section of your policy that will protect you.
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. Please note that third party liability insurance is a type of coverage that you must add to your respective insurance policies in order to benefit from it.
For most people, this means adding third party liability coverage to both their home insurance and auto insurance policies.
How much third party liability coverage do I need?
Depending on the type of insurance policy you wish to purchase, there may be minimum amounts of third party liability coverage you are legally required to buy.
These amounts will vary depending on the province you live in, so we recommend researching the specific rules about third party liability insurance in your province or speak with an insurance broker from BrokerLink, as they know the ins and outs of the insurance industry in Canada and can help you find a policy that both meets your needs and complies with any mandatory coverage requirements in your province.
Though coverage requirements vary by province and policy, many home and car insurance policies require a minimum of between $200,000 and $1,000,000 in third party liability insurance. Note that if a claim is awarded that exceeds the amount of coverage in your policy, you will be responsible for paying the remainder out of pocket. Therefore, it’s crucial to ensure you have the necessary coverage.
Choosing less coverage because it’s cheaper isn’t always the wisest decision and could end up costing you more money down the line should an expensive accident occur. You can also increase your liability limits. Speak with your insurance broker for guidance.
When it comes to home insurance, factors that might necessitate a greater amount of third party liability coverage include if you operate a business out of your home, if your home has a swimming pool, or if you have an aggressive pet.
Meanwhile, considerations that relate to car insurance include if you frequently drive on major highways or at night, if you spend an above-average amount of time on the road (for example, if you drive as part of your job), if you frequently drive outside of Canada (in the U.S.), or if you often drive in hazardous conditions. If any of these circumstances ring true, it might be worth increasing your third party liability coverage limit.
In some cases, having a higher third party liability limit doesn’t necessarily cost significantly more money. Therefore, it’s certainly worth inquiring about if you have reason to believe you are at a higher risk of an accident. BrokerLink can help walk you through the various third party liability coverage options available to you so that you can find one that suits your lifestyle and budget.
When else might third party liability coverage come in handy?
At this point, you may be thinking that third party liability coverage is only applicable in the event of a lawsuit, but this isn’t always the case. You don’t necessarily need to face a lawsuit to be eligible for third party liability coverage.
If you’re responsible for injuring someone else or damaging their property, your insurance provider can seek restitution on your behalf without you being sued. Policyholders can choose to include coverage for voluntary payments in their policies.
So if you find yourself responsible for an accident, even if the victim does not file a lawsuit against you, it can still be worthwhile to get in touch with your insurance company.
Mandatory third party liability insurance in Canada
As alluded to above, there are certain situations in which third party liability coverage is not only recommended but is mandatory in Canada. This is the case with auto insurance. Auto insurance is a legal requirement in every Canadian province and territory.
Though the specific coverage requirements vary, every part of Canada requires drivers to hold a certain amount of third party liability coverage with their policies. For example, in Alberta and Ontario, drivers are required to carry a minimum of $200,000 in third party liability coverage at all times. In Nova Scotia, this requirement rises to $500,000, though most Canadians choose to purchase anywhere between $1,000,000 and $5,000,000 in liability coverage.
Overall, the fact that it’s mandatory demonstrates the importance of third party liability coverage. To keep yourself and others safe on the road, you must purchase a car insurance policy with third party liability insurance. Get in touch with BrokerLink to learn more about mandatory third party liability coverage in your province.
Contact BrokerLink to learn more about third party liability insurance in Canada
Do you want to learn more about third party liability insurance in Canada? You’re in the right place! We are insurance experts, which means we know everything about third party liability coverage, especially as it pertains to home insurance, car insurance, and business insurance.
So if you have questions about how third party liability coverage can protect you, how much to include with your policy, or the mandatory coverage requirements in your province, get in touch with BrokerLink today.
Our friendly insurance advisors can answer any questions you may have and offer their unbiased, objective opinions on the right amount of third party liability insurance for you.
Please note that BrokerLink also offers free insurance quotes to all Canadians. Whether you’re looking for a quote on auto insurance, business insurance, travel insurance, or homeowners insurance, you can use our online quote tool to obtain an accurate quote in minutes.