An Intro to Liability Coverage

Your Auto Insurance Explained: An Introduction to Liability Coverage

As brokers, we commonly hear clients say that they want “Liability only” coverage for their vehicle. As often as we hear it, clients don’t always fully appreciate what they are requesting, or by extension, what they are leaving out in their coverage if they go down this road. There are many components to an auto insurance policy, and in a series of posts, we’ll tackle each of the most common so that you know what’s available, what’s compulsory, what’s optional and the benefits of each.

Let’s get started!

What Is Third Party Liability Coverage?

Third-Party Liability traditionally covers legal liability for losses that result in bodily injury or property damage to a third party. Sounds like lawyer talk, doesn’t it? It is, so we’ll try here to take the lawyer-ese out of it.

  • First party, second party and third party

In an insurance contract, the first party is the policyholder or anyone insured under the contract; basically anyone who is permitted to drive the vehicle. The second party is the insurer, or insurance company. And lastly, the third party is any person or entity outside of the first and second party that experiences a loss in an automobile accident.

  • Legal liability

If you’re legally liable for something, it means you’re responsible for paying for the harm you’ve caused whether it be a result of an injury, death or damage to someone else’s property.

Third-party liability is a compulsory coverage no matter where you live in Canada.

Third-Party Liability: How Much Is Enough?

Typically, people carry $1 Million or $2 Million of liability coverage on their vehicle insurance. This may seem like an excessive amount of coverage to many people. Insurers, however, will tell you that losses can reach and exceed more than $4 or $5 Million in payouts.

  • Umbrella Policies: Getting Extra Liability Coverage

If you want higher limits of liability on your car insurance, you may want inquire with your broker about obtaining an Umbrella policy. This is an additional insurance product that can cover you for extra liability coverage on all your interests: your cars, home, cottage, and other toys like ATV’s, boats, or snowmobiles. Some insurers add it on as an endorsement to your property policy, while others issue a separate policy all together which specifies top-down coverage on all or some of your other insurance policies, such as your vehicle policy. If you’re interested in an Umbrella policy, your broker can help you select the best product for you and your needs.

Having adequate third party liability coverage is increasingly important as litigious activity becomes increasingly common. If you are unsure on whether you are properly covered, call the experts. We are there to help you with these complex decisions.


Darryl May

Darryl May

CUSTOMER SERVICE MANAGER, DEPUTY PRINCIPAL BROKER - Darryl May joined KTX Insurance Brokers in 2006 as a Sales Broker and has been leading the Customer Service Team since 2010. He also added Deputy Principal Broker responsibilities in 2011. Leveraging technology to improve the customer experience is Darryl’s passion and has been the focal point in his efforts to increase customer loyalty and satisfaction. While client expectations continue to evolve, Darryl is dedicated to meeting that challenge by making KTX an industry leader in customer experience. Darryl has progressed through a number of insurance and client relation roles since 2002 and is a graduate of Queen’s University.

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