Mar 19, 2020
Third party liability insurance coverage is an important form of protection found in your car insurance policy. It’s one of a number of types of mandatory coverage you are required to have in order to drive in Canada. It particularly comes in handy when you injure someone or cause property damage while operating your vehicle.
In this blog we will define third party liability insurance (TPL), explain what is covered, how it works, discuss why it’s important and answer other common questions about third party liability coverage.
What Is Third Party Liability Insurance?
A 3rd party liability insurance policy provides you with financial protection if you are found to be responsible for an accident resulting in property damage, personal injury or death. You are required to have third party liability coverage in order to operate a vehicle in Canada.
What Is Covered By Third Party Liability Insurance?
The following is covered by your third party liability auto insurance policy :
- Repair costs for vehicles damaged in an accident caused by you.
- Repair costs to any property you’ve damaged.
- Medical costs for anyone you’ve injured.
- Legal fees and lawsuits as a result of the accident.
- Damages awarded to the injured parties from a lawsuit.
Why Is Third Party Liability Coverage So Important?
Car accidents happen. Drivers make mistakes. Even if you do everything you can to prevent damage or injury, they still happen. Unfortunately, accidents often result in legal proceedings and lawsuits.
Third party liability coverage is applicable when someone makes a claim against you or your insurance company. If you are found responsible damage or injury to others, legal liability insurance coverage ensures you don’t have to pay out of pocket for the damages.
Is Third Party Liability Insurance Mandatory?
Yes. All drivers in Canada are required to have a minimum amount of third party liability coverage.
How Much Third Party Liability Coverage Do I Need?
Drivers are required to have a minimum amount of third party liability insurance coverage. The compulsory third party liability amount is set at the provincial level. Most provinces require you have a minimum of $200,000 in third party liability coverage.
However, due to the cost of medical bills and lawsuits, it’s highly recommended to increase your third party liability coverage limits. You can increase it to $500,000, $1 million, or $2 million and the cost to increase your coverage is small.
Once a claim has surpassed your coverage limits, you are required to pay the remaining costs out of pocket. A court judgement or settlement could be applied against your assets. Increasing your coverage limits reduces the chances of this happening.
When Should I Increase My Third Party Liability Coverage Limits?
Legal liability coverage provides you with a basic amount of coverage. How you use your vehicle can impact the potential risk and damage you are exposed to. It’s recommended you increase your coverage limits if :
- You carpool and frequently drive with others in the vehicle.
- You drive your vehicle for work.
- You drive in the United States frequently.
- You drive in a riskier location (more traffic, cars, higher accident rates).
How Does Third Party Liability Coverage Work?
Third party liability coverage protects you in the event your vehicle causes harm to another person or their property. If you cause injury, death, or property damage, third part liability coverage is applicable and will cover these insurance claims up to your policy limit.
Third Party Liability Coverage Examples
- You back into your neighbors fence
- You vehicle slides off the road during slippery conditions and damages a business’s advertising sign or street light.
- You lose control of your vehicle and drive into the storefront of a local business.
- You hit a pedestrian or cyclist while driving and they sue you for damages.
- You cause an accident with another vehicle, resulting in death. The deceased motorist’s family sues you.
In each of the above causes, your TPL coverage will protect you.
How Much Does Third Party Liability Insurance Cost?
Third party liability coverage is not a standalone policy. It’s included as part of your mandatory insurance coverage, along with accident benefits coverage.
The cost of your third party liability insurance premium will depend on your coverage limits, how much additional coverage you add to your policy – collision insurance, comprehensive insurance, Direct Compensation Property Damage (DCPD) and other policy add-ons.
Other factors such as the vehicle your drive, your location, and driving history will also be factored into your policy costs.
Third Party Liability Insurance Requirements In Canada
Third party liability car insurance coverage requirements are set by your provincial insurance regulations. Here is the minimum third party liability Insurance coverage required :
How Much Third Party Liability Insurance Is Requried In Ontario?
$200,000 in third party liability coverage is mandatory for Ontario car insurance. If a claim for damages exceeds this amount, payment for property damage will be capped at $10,000. DCPD applies.
Third Party Liability Insurance In Alberta
$200,000 in third party liability coverage is mandatory. If a claim for damages exceeds this amount, payment for property damage will be capped at $10,000.
Learn more about mandatory and optional car insurance in Alberta.
Third Party Liability Coverage In Other Provinces And Territories
- British Columbia : $200,000 minimum. Payment for property damage capped at $20,000.
- Manitoba : $200,000 minimum. Payment for property damage capped at $20,000.
- New Brunswick : $200,000 minimum. Payment for property damage capped at $20,000.
- Newfoundland : $200,000 minimum. Payment for property damage capped at $20,000.
- Nova Scotia : $500,000 minimum.
- Northwest Territories : $200,000 minimum. Payment for property damage capped at $10,000.
- Nunavut : $200,000 minimum. Payment for property damage capped at $10,000.
- PEI : $200,000 minimum. Payment for property damage capped at $10,000.
- Quebec : $50,000 minimum.
- Saskatchewan : $200,000 minimum. Payment for property damage capped at $10,000.
- Yukon : $200,000 minimum. Payment for property damage capped at $10,000.
Third Party Liability Insurance FAQs
Here are some additional common questions drivers ask about third party liability insurance coverage :
Third party liability insurance does NOT coverage the cost of injuries to yourself or damage to your vehicle for an at fault accident. Accident benefits and collision coverage is used for this.
In most cases, your current car insurance policy will include third party liability coverage for your rental car insurance. But, it may or may not cover collision or damage to the rental vehicle. Speak with your car insuance advisor to get clarification about if you have rental car third party liability coverage.
Many people are confused about the third party liability insurance meaning. In all accidents, there are three parties involved. The driver is the first party, the insurance company is the second party, and the other driver or person who was injured/at property damaged is the third party.
If you were at fault for an accident and caused injured or property damage to a third party, your insurance company will review the costs to compensate them and offer a settlement.
The third party can agree to the terms, seek legal advice or file a lawsuit. Your coverage will cover costs up to your policy limit.
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