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What Is Liability Car Insurance? The Answers You Need to Know

Monday, 18 December 2023

As we’re all aware, you must possess auto insurance if you intend to drive in Canada. There are many types of insurance out there, such as comprehensive coverage, collision coverage, and direct compensation. But what is liability car insurance?

Generally speaking, it is a crucial and mandatory component of car insurance that provides you with financial protection in the event of an accident. In this blog, we’ll discuss the coverage it provides, when and how it protects you, and things to keep in mind when searching for a policy.  

Types of Liability Coverage

So, what is liability car insurance used for? Well, it covers two main areas: bodily injury and property damage. Understanding the nuances of how this coverage works is important for anyone who plans to get behind the wheel of a car.

Bodily Injury Liability

Simply put, this form of coverage is used when a third party incurs injuries that require medical attention as a result of an accident where you were at fault.

Property Damage Liability

Similar to bodily injury, this coverage comes into effect when damage to someone else’s property occurs following an accident that you caused.

How Liability Coverage Protects You

If you cause an accident while driving your car, liability insurance coverage protects you financially. It takes care of medical bills or repair costs if someone is physically harmed or their property is damaged during the incident. This ensures that you're not personally responsible for paying substantial expenses with your funds.

Cost Considerations for Liability Insurance

Understanding the factors that influence the cost of liability insurance, along with practical tips for securing affordable coverage, is essential for managing your budget while ensuring adequate protection.

Factors Influencing the Cost of Liability Insurance

As previously stated, liability insurance is a legal requirement for Canadian drivers. Just like any other form of insurance, finding out how much you pay for liability insurance and auto insurance, in general, is based on a variety of factors, including:

  • Your age and gender
  • Your coverage amount
  • The province you live in
  • Your driving record and experience
  • The make and model of your vehicle
  • Your claims history

Average Cost for Liability Insurance

The average cost for liability insurance can vary widely based on the factors stated above and regional considerations. Obtaining personalized quotes is crucial to understanding the cost specific to your circumstances.

Tips for Getting Affordable Liability Insurance

Here are some tips that can help you secure the best rates on your auto insurance:

  • Shop around and obtain quotes
  • Consider bundling your auto insurance with other policies
  • Maintain a clean driving record
  • Increase the deductible you pay in the event of a claim
  • Inquire about available discounts
  • Review your policy to identify opportunities where you can adjust your coverage

Coverage Details of Liability Car Insurance

Liability car insurance provides essential coverage for drivers. Understanding the scope of coverage and its limitations is crucial for all drivers in Canada.

What Does Liability Car Insurance Cover?

Liability coverage for car insurance provides crucial protection that addresses the expenses incurred by people who are injured or have their property damaged in an accident you caused.

Coverage for Injuries to Others

If someone is injured in an accident, this coverage helps pay for:

  • Medical expenses
  • Rehabilitation costs
  • Lost wages
  • Legal defense costs
  • Funeral expenses

Coverage for Damage to Other People's Property

In the event there is property damage, your insurance can cover the cost of repairing or fixing:

  • Vehicles
  • Structures or buildings
  • Personal belongings
  • Public or private infrastructure

It will also cover legal fees in the event of a lawsuit.

What Liability Car Insurance Does Not Cover

If you are at fault, damage to your vehicle, personal injuries, or scenarios involving uninsured or underinsured motorists are not covered. Coverage for theft, vandalism, and non-collision events such as natural disasters are also excluded.

Exploring Affordable Insurance Liability Options

While opting for more affordable insurance policies may save on premiums, it's crucial to comprehend the potential compromises involved. Finding coverage that is not only affordable but also sufficient is strongly recommended.

Comparing Quotes for the Best Rates

Obtaining quotes from multiple insurance providers allows you to identify the most competitive rates and coverage options available in the market. This ensures you make an informed decision that balances affordability with adequate protection.

Understanding the Trade-offs of Lower Premiums

Paying less for insurance sounds great in theory, but it’s worth noting that this typically means your policy has limitations in coverage, higher deductibles, or stricter terms and conditions. Assess your situation to determine if you can handle the financial implications of paying more on your deductible or if you can afford to pay out of pocket if you don’t have enough coverage in your policy.

What is Liability Only Insurance?

Car insurance with liability only provides basic coverage, focusing on bodily injury and property damage liability and does not include protection for your vehicle. Budget-conscious drivers often choose these policies to fulfill legal requirements while minimizing insurance costs. Depending on where you live, additional coverage may be mandatory.

When to Choose Liability-Only Insurance

Opting for liability-only insurance is advisable when you have an older or less valuable vehicle, as the cost of comprehensive coverage may outweigh the potential benefits. High mileage and increased wear and tear on your car can be key in determining this.

Pros and Cons of Liability-Only Insurance

Pros include lower premiums, making it a cost-effective option, especially for older cars. However, the cons involve a lack of coverage for your vehicle's damages, potentially leaving you personally responsible for repair or replacement costs.

Insurance Liability for Cars: Legal Requirements and Recommendations

Provincial and Territorial Requirements for Liability Insurance

Each province and territory is subject to different auto insurance regulations. It is recommended you familiarize yourself with the coverage you are required to have before you begin shopping for a policy.

Recommended Coverage Limits

While there are varying degrees of minimum coverage required in Canada, many insurance professionals suggest you have a liability limit that falls between $1 million and $2 million. Expenses paid out through a claim can be substantial and add up quickly, so it’s best to pay more on your policy to ensure you are fully covered.

Consequences of Not Having Adequate Liability Insurance

If you do not have adequate liability insurance, you could be on the hook to cover expenses yourself. This can deal a massive blow to your finances and make an unfortunate situation much worse.

Final Thoughts and Advice for Choosing the Right Coverage

Now that we’ve answered the question, “What is liability car insurance?” you might wonder if your plan has enough coverage. Finding the right liability auto insurance coverage is about balancing the basics, your budget, and some extra protection if needed. Remember, liability coverage is a must, but take a moment to weigh your options.

Keep it simple, compare quotes, and pick what fits your budget, providing peace of mind. If you need added advice, contact your nearest BIG branch and speak to a broker to review the best options that are available to you.

By: Devon Gribble