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Third-party liability insurance (TPL) is an important part of your automobile policy. Even when you do everything you can to prevent damage or injury, crashes still happen, and accident claims often result in legal proceedings and lawsuits. According to the Insurance Bureau of Canada (IBC), third-party liability claims payouts accounted for 46.6% of all direct claims incurred.
Third-party liability provides financial protection if you are found responsible for an accident that results in property damage, repairs, personal injury, or death. It is mandatory on all Canadian automobile policies. When someone makes a claim against you, TPL takes effect, so you do not have to pay out of pocket for damages you are responsible for.
For example, suppose you rear-end another vehicle, injuring the driver and damaging their car. You would be at fault and a claim would be filed, and this is where TPL takes effect. It would cover the victim's property, repairs, medical costs, and even lost wages where applicable.
Third-party liability also exists under your home insurance, but that is a separate type of coverage that does not apply to your auto policy.
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Your third-party liability covers the following:
Third-party liability does not cover the cost of injuries to yourself or damage to your own vehicle in an at-fault accident. Accident benefits and collision coverage are used for that. No-fault insurance laws do not protect you from injury lawsuits if you seriously injure a third party in a collision.
If you cause injury, death, or property damage, third-party liability insurance applies and will cover these types of car insurance claims up to your policy limit. Here are some examples:
Here are two examples that show the importance of third-party liability:
John accidentally rear-ended another car at a traffic light, causing $2,500 in damage. His third-party liability insurance covered the cost of repairs for the other car, but it did not cover the damage to his own car.
Sarah ran a red light and collided with Tom's car, causing a broken leg, $15,000 in medical expenses, and lost wages. Sarah's third-party liability car insurance covered Tom's expenses.
All drivers in Canada must carry a minimum amount of third-party liability insurance on their auto policy. The compulsory amount is set at the provincial level; most provinces require a minimum of $200,000.
However, because of the cost of medical bills and lawsuits, increasing your limits is highly recommended. You can increase your coverage to $500,000, $1 million, or $2 million without a large increase to your premium.
Once a claim surpasses your limits, you are required to pay the remaining costs out of pocket, and a court judgment or settlement can be applied against your assets. Increasing your limits reduces the chance of this happening.
Find the lowest rates for third-party liability insurance in just a couple of minutes. Compare insurance quotes online from the top Ontario providers or speak with a licensed ThinkInsure advisor today.
Get startedThird-party liability is not a standalone policy. It is included as part of your mandatory coverage, along with accident benefits.
The cost of TPL depends on your limits and 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 you drive, your location, and your driving history, will also affect your premium.
Basic plans provide a minimal amount of coverage, and how you use your vehicle affects your potential risk. It is recommended you increase your limit if:
Third-party liability requirements are set by provincial regulations. Here is the minimum amount required across Canada.
$200,000 in third-party liability is mandatory in Ontario car insurance. If a claim for damages exceeds this amount, payment for property damage is capped at $10,000, and DCPD applies.
$200,000 in third-party liability is mandatory in Alberta. If a claim exceeds this amount, payment for property damage is capped at $10,000. Learn more about Alberta car insurance and what is included.
Minimums vary by province and territory. Here is how they compare across Canada:
| Province / territory | Minimum third-party liability | Property damage cap if exceeded |
|---|---|---|
| Ontario | $200,000 | $10,000 (DCPD applies) |
| Alberta | $200,000 | $10,000 |
| British Columbia | $200,000 | $20,000 |
| Manitoba | $200,000 | $20,000 |
| New Brunswick | $200,000 | $20,000 |
| Newfoundland and Labrador | $200,000 | $20,000 |
| Northwest Territories | $200,000 | $10,000 |
| Nova Scotia | $500,000 | Not specified |
| Nunavut | $200,000 | $10,000 |
| Prince Edward Island | $200,000 | $10,000 |
| Quebec | $50,000 | Not specified |
| Saskatchewan | $200,000 | $10,000 |
| Yukon | $200,000 | $10,000 |
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In most cases, your current policy includes third-party liability for your rental car insurance. However, it may or may not cover collision or damage to the rental vehicle. Speak with your advisor for clarification.
In every accident, there are three parties. 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 injury or property damage to a third party, your insurer reviews the costs to compensate them and offers a settlement. The third party can agree to the terms, seek legal advice, or file a lawsuit. It covers costs up to your policy limit.
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Third-party liability is mandatory, so the real question is how much coverage you carry. Our RIBO licensed advisors can help you choose a limit that protects your assets, and find you the best rate.
Our advisors help you choose a liability limit that protects your assets based on how and where you drive, so you are not left exposed by the minimum.
We instantly compare coverage and rates from our large selection of Ontario insurance providers to find you the lowest price.
Choose the provider that offers the best coverage and rate for your needs. We often can get you insured with a new automobile policy on the same day.
Call us if you have questions about liability limits, what is covered, or how increasing your limit affects your premium. We often can get you insured the same day.
Third-party liability is mandatory, so the real question is how much. The $200,000 minimum is rarely enough given today's medical and legal costs. Increasing your limit to $1 million or $2 million usually costs little and protects your assets if a claim goes higher.
Wasim Khan
Insurance Broker (RIBO)
Monday-Friday: 8am-6pm
The information on this page is for general guidance about third-party liability car insurance in Ontario. Minimum coverage requirements are set by each province and territory and can change, so the figures here are provided as a reference. Claims statistics are from the Insurance Bureau of Canada (IBC). For regulatory details on Ontario auto insurance, see the Financial Services Regulatory Authority of Ontario (FSRA). Speak with a ThinkInsure RIBO licensed advisor to confirm what applies to your policy.
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Nolan is a content marketing manager and writer at ThinkInsure. He has 15+ years of experience in the insurance industry, working with brokerages and direct insurers to create compelling insurance content, specializing in auto, home, and commercial.
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