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Third-party liability insurance is mandatory coverage for all drivers in Canada. It offers protection for drivers if they’re at fault in an accident and the other party is hurt or even killed. This is mandated at a provincial level, and all provinces require a minimum of $200,000 in third-party insurance coverage, except for Quebec, where the minimum is $50,000. Many Canadians set their policy default between $1 million and $5 million.
There are a variety of reasons people increase their minimum third-party car insurance coverage, including if you frequently carpool, use your vehicle for commercial purposes, live in a metropolitan centre, or regularly cross the Canada-U.S. border in your vehicle. Experts recommend considering a default of $1 million or $2 million in the situation where your damage is likely to exceed the provincially mandated minimums.
What is third-party liability insurance?
In Canada, third-party insurance coverage ultimately aims to protect you if you’re involved in an accident where you may be at fault or liable to pay for property damages, third-party injury, or even death. The coverage is a portion of your main auto insurance coverage, and works with other elements of insurance to provide full protection across various claims:
- Accident benefits or Statutory Accident Benefits Schedule (protecting you, the driver and policy owner)
- Third-party car insurance (protecting third parties’ damage and/or personal injury or death)
- Uninsured automobile insurance (protects you if you’re involved in an accident with an uninsured driver)
Accidents are easy and can happen in the blink of an eye. They are often a result of a mistake that leads drivers down a long road of legal battles and back-and-forth with insurance companies. Having the right third-party liability coverage gives you protection when someone files a claim against you, and if you’re responsible, provides insurance coverage to pay for damages.
What does third-party liability coverage include?
Third-party insurance provides coverage when you are responsible or at fault, resulting in property damage or personal injury. This includes death, and coverage will be assessed and applied according to policy agreements. Scenarios can include:
- Accidental damage of a neighbour’s property
- Replacing a business’ equipment or signage
- Hitting another vehicle causing personal injury or death
- Collisions with a cyclist or pedestrian causing personal injury or death
The minimum for most provinces is $200,000 (again $50,000 in Quebec), but coverage can be increased to provide added protection. This includes, but isn’t limited to, needing higher coverage for repair costs of the third-party vehicle when you’re responsible, property repairs, legal costs, medical bills, as well as any other settlements pending legal action. (If you want to cut costs on your auto insurance, consider these things.)
Who needs this coverage and how much does it cost?
All Canadians need third-party liability coverage, as set and mandated by provinces and territories. Here’s the coverage breakdown:
As for how much you will pay, it’s complicated. The monthly average costs can range from $600 to $1,600 plus. And the premiums vary with add-on coverage that are above and beyond the minimums, but additional factors also play a role in overall premium rate, which can include third-party liability insurance: