Sep 17, 2021
What You Should Know About Third-party Liability Insurance
Third-party liability insurance (TPL) is an important form of protection found in your automobile policy. Even if you do everything you can to prevent damage or injury, they still happen when you are in a crash. Unfortunately, accident claims happen and often result in legal proceedings and lawsuits.
According to the IBC, in 2019, third-party liability claims payouts accounted for 46.6% of all direct claims incurred.
When someone makes a claim against you or your insurer, TPL takes effect. If you are found responsible for damage or injury to others, this type of policy ensures you don't have to pay out of pocket for the damages.
What Is Third-party Liability Car Insurance?
Third-party liability insurance provides you with financial protection if you are found to be responsible for an accident resulting in property damage, repairs, personal injury, or death. It is mandatory to have TPL on all Canadian automobile policies.
For example, suppose you rear-end another vehicle causing injury to the driver and damage their car. In this case, you would be at-fault and a claim would be filed. This is where TPL will take effect. It will cover the victim's property, repairs, medical costs, and even loss of wages (if applicable).
Third-party liability also exists under your home insurance. This is a different type of coverage that is not applicable to your auto policy.
What Is Covered By Third-party Liability Insurance?
Your third-party liability covers the following :
- 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.
Third-party liability does NOT cover the cost of injuries to yourself or damage to your vehicle for an at-fault accident. Accident benefits and collision are used for this.
How Much Third-party Liability Insurance Do I Need?
All drivers in Canada must have a minimum amount of third-party liability insurance on their auto policy. The compulsory amount is set at the provincial level - most provinces require you have a minimum of $200,000.
However, due to the cost of medical bills and lawsuits, increasing the limits is highly recommended. You can increase it to $500,000, $1 million, or $2 million without a high increase on your premium.
Once a claim has surpassed your limits, you are required to pay the remaining costs out of pocket. A court judgement or settlement can be applied against your assets. Increasing your limits reduces the chances of this happening.
When Should I Increase My Third-party Liability Limits?
Basic plans provide you with a minimal amount of coverage. How you use your vehicle can impact the potential risk and damages. It's recommended you increase your limit 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 high traffic area.
How Does Third-party Liability Car Insurance Work?
If you cause injury, death, or property damage, third-party liability car insurance is applicable and will cover these claims up to your policy limit.
Here are some examples :
- You back into your neighbours fence.
- Your 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.
How Much Does Third-party Insurance Cost?
Third-party insurance is not a standalone policy. It’s included as part of your mandatory coverage, along with accident benefits.
The cost of TPL will depend on your limits, how much additional protection you add such as, – collision, comprehensive, Direct Compensation Property Damage (DCPD) and other policy add-ons.
Other factors such as the vehicle your drive, location, and driving history will also be factored into your premium costs.
Third-party Liability Insurance Requirements
Third-party liability requirements are set by your provincial regulations. Here is the minimum amount required across Canada :
How Much Third-party Liability Insurance Is Required In Ontario?
$200,000 in third-party liability is mandatory in Ontario car insurance. If a claim for damages exceeds this amount, payment for damages will be capped at $10,000 and DCPD applies.
Third-party Liability Insurance In Alberta
$200,000 in third-party liability is mandatory. If a claim for damages exceeds this amount, payment for property damage is capped at $10,000.
Learn more about Alberta car insurance and what's included.
Third-party Liability In Other Provinces And Territories
Here are the minimum TPL limits in other regions :
- 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
In most cases, your current policy will include third-party liability for your rental car insurance. But, it may or may not cover collision or damage to the rental vehicle. Speak with your advisor to get clarification.
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, or had 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 insurer 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. It will cover costs up to your policy limit.
You buy third party-liability as part of your car insurance quote. Give us a call 1-855-550-5515.