What you need to know about Liability Car Insurance

What is Liability Car Insurance?

Liability insurance is a mandatory coverage that must be included on your car insurance policy in order to legally drive a vehicle in Canada. If you’re at-fault in a car accident, your liability coverage helps cover the cost of legal expenses arising from damages caused to other drivers, pedestrians, or property, up to your policy limit.

What is a Liability-Only Policy?

When someone requests “Liability Only” car insurance coverage, they are typically referring to a policy that includes only the minimum amount of insurance required by law. However, in Ontario this is more than just liability - it includes liability, accident benefits, DCPC, and uninsured automobile coverage.

What Does Liability Insurance Cover?

There are two types of coverage under the liability section of your car insurance policy; bodily injury and property damage.

Bodily injury covers expenses associated with injuring someone else in an at-fault accident. Your policy may respond by covering the costs of their medical expenses and loss of wages as a result.

Property damage helps pay for damage you cause to someone else’s personal property during an accident. This can include anything from their car to their house.

How Much Liability Coverage Do I Need?

Every driver is required to carry a minimum coverage that is specified by their province, with an example being Ontario's requirement of $200,000 in liability coverage on their car insurance policy. However, due to increasing legal costs and lawsuit settlements in Canada, the minimum amount of coverage typically recommended by insurance professionals is now $1,000,000.

In many cases, it is advisable to carry even higher liability limits up to $2,000,000, especially if any of the following applies to you:

  • You frequently carpool or drive with others in your vehicle
  • You drive your vehicle for business reasons
  • You drive to the United States frequently
  • You often drive in areas with lots of traffic or high accident rates

What Liability Insurance Does Not Cover?

To put it simply, liability insurance provides protection against damage you inflict on other people and their property, but does not cover any of your own damages.

For example, if you have a liability-only car insurance policy and are involved in an at-fault accident, you’re responsible for paying for damages to your own car out-of-pocket, while your medical expenses will be covered under the mandatory accident benefits section of your policy, subject to your policy limits.

In order to be covered for your own property damage, you must have either Collision Coverage or Comprehensive Coverage on your policy. These coverage options will offset the following expenses that liability-only does not cover:

  • Physical damage to your property or vehicle
  • Theft
  • Vandalism
  • Natural disasters
  • Hit and run
  • Physical damage due to colliding with an animal or object

Who is Liability-Only Insurance recommended to?

Liability-only coverage is definitely not a suitable option for everyone. Some people may require more coverage if their vehicle is financed or leased, while others may appreciate more peace of mind in knowing that they have extensive insurance protection.

On the other hand, full-coverage insurance also isn’t necessary to have in every situation. Other important factors to consider when deciding whether or not to drop your full coverage include:

  • The age of your vehicle; the older it is, the more likely it has depreciated
  • The mileage you have put on your vehicle; more mileage decreases the car’s value
  • The replacement cost of your vehicle
  • The overall wear and tear of your vehicle

How much does Liability-Only Insurance cost?

Just like most other insurance policies, the cost of liability-only coverage is almost impossible to pinpoint. This is because a number of factors are considered when calculating each individual’s final cost. These factors can include your age, the make of your vehicle, where you live and your driving history.

One major aspect of liability coverage that really doesn’t affect the price too much is how much coverage you choose to have. This may seem surprising, as liability coverage ranges from $200,000 to $2 million. However, the cost to increase your liability coverage is small in most cases, and most coverage options cost a similar price to one another.


Deciding whether to get a Liability-Only policy, or something more comprehensive, is a very big decision. When making this choice, it is important to consider your own individual situation and what options will benefit you the most.

Have more questions about Liability-Only Insurance or any other coverage options? Get in touch with one of our licensed insurance professionals.

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