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Third Party Liability Explained – Auto Insurance

Third Party Liability Coverage protects you if someone else is seriously injured or dies, or if their property is damaged, caused during the use of your vehicle. Your liability coverage will pay for accident benefits, medical costs, lawsuits and damages awarded to the injured party, but it will only pay up to the amount of coverage you have chosen. You can choose the amount of your liability coverage depending on what makes sense for your situation.

How Much Liability Coverage Do I Need?

Did you know that the minimum liability coverage you must have by law in Ontario is $200,000? Scary isn’t it? That being said, HMS Insurance Inc. recommends a limit of $2 million for most people, and at the very least $1 million. Depending on how you use your vehicle, you may need to consider a higher level of liability coverage. Here are some everyday situations where you might want to have extra liability protection:

  • If you carpool regularly to work
  • If you drive children to school or other regular events
  • If you often drive in the U.S. where lawsuits tend to give larger settlements than those in Canada
  • If you occasionally use your vehicle for business use

Liability Umbrella for Both Home and Car

If a higher level of liability protection is something you’d like to have for both your car and home insurance policies, there is an economical way to add it using an Umbrella Liability Policy. This option provides the additional level of liability coverage you want and applies it to both of your policies. If you’re concerned that your current amount of coverage is not sufficient, instead of increasing it on each policy separately, ask about the umbrella liability option that applies to both.

How Does No-Fault Insurance Apply?

The term “no-fault insurance” is often misunderstood, but it simply means that the insurance company for each person involved in the accident pays for damages and injuries no matter who was at fault.

Most provinces now have some kind of no-fault insurance in effect. The type we have in Ontario has an upper limit or a threshold meaning the no-fault clause applies up to a certain limit of liability. If you were injured in an accident, it would be your own insurance that covers you for your medical treatment, loss of income, living expenses, home care, etc. (i.e. accident benefit coverage)