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Here’s a look at third-party liability insurance in Canada—including what happens after an accident that causes property damage, injury or death.
Third-party liability insurance is like other mandatory insurance coverages in Canada—easy to forget about on ordinary days. It’s when things go unexpectedly wrong that we’re thankful for the coverage that insurance provides.
Driving accidents often occur in the blink of an eye, and they can happen to anyone, even the most experienced and careful drivers. The worst-case scenarios, in which another driver is seriously injured or killed, can lead to prolonged legal battles involving a lot of back-and-forth with insurance companies. That’s why third-party liability coverage is such an important element of auto insurance policies.
In Canada, liability basically means that an individual or a business can be held responsible for an action in the eyes of the law. There are different standards of liability, ranging from “intention” to “negligence.” What’s important to know is that liability means a party can be held accountable to varying degrees when another party suffers damages.
In the context of insurance, third party refers to someone who is not part of a contract between the first party (the person insured) and the second party (the insurance company). So, in auto insurance, third-party liability refers to coverage that is used when a driver is at fault in an accident involving a third party who is hurt or killed or whose property is damaged.
Third-party liability insurance covers drivers if they’re at fault in an accident and the other party is hurt or killed. It also covers damages to the other person’s property and related repair costs. It is a mandatory component of an auto insurance policy, which Canadian drivers are legally required to obtain before hitting the road.
As such, third-party liability coverage works together with other elements of your policy to provide full protection across various claims. (Read our guide to getting the best car insurance in Canada). These other components include:
In Canada, auto insurance rules can differ from one province to another, but there are similarities when it comes to mandatory coverages. Every province and territory requires a minimum of $200,000 in third-party liability coverage, except for Quebec, where the minimum is $50,000, and for Nova Scotia, where it is $500,000. However, a single accident can easily exceed the minimum coverage, so many drivers choose to pay for $1 million to $5 million in coverage.
Third-party liability insurance provides coverage when you are responsible or at fault for an accident that results in property damage, personal injury or death. Coverage is assessed and applied according to your policy agreement, but it will typically cover the following types of accidents:
Third-party liability insurance doesn’t cover you if you’re at fault in an accident and you get injured or damage your own property. To be covered for that, you would need accident benefits and collision coverage.
All Canadian drivers need third-party liability coverage. Here’s a breakdown of what mandatory coverages look like across the different provinces and territories:
| Province | Minimum coverage | Property damage payment cap |
|---|---|---|
| Alberta | $200,000 | $10,000 |
| British Columbia | $200,000 | $20,000 |
| Manitoba | $200,000 | $20,000 |
| New Brunswick | $200,000 | $20,000 |
| Newfoundland & Labrador | $200,000 | $20,000 |
| Northwest Territories | $200,000 | $10,000 |
| Nova Scotia | $500,000 | n/a |
| Nunavut | $200,000 | $10,000 |
| Ontario | $200,000 | $10,000 |
| Prince Edward Island | $200,000 | $10,000 |
| Quebec | $50,000 | n/a |
| Saskatchewan | $200,000 | $10,000 |
| Yukon | $200,000 | $10,000 |
Coverage can be increased to provide added protection. There are a variety of reasons people increase their minimum third-party car insurance coverage, including if they frequently carpool, use their vehicle for commercial purposes, live in a metropolitan area, or regularly drive across the Canada-U.S. border. Experts recommend considering a default of $1 million to $2 million in coverage if damage is likely to exceed the provincially mandated minimums.
As for how much you will pay, it’s complicated. Remember: Third-party liability is included in all standard insurance policies, whose costs can vary. The monthly average cost for auto insurance in Canada can range from $600 to more than $1,600. And the premiums vary with add-on coverages that are above and beyond the minimums. The following additional factors also play a role in your overall premium rate:
As with any other type of insurance, you’ll have to contact a provider or insurance broker. To find the best rate on the policy that meets your needs, start by comparing quotes online. There are tools you can use to compare rates online, instead of applying to numerous insurance providers at the same time.
Seeing as there are many factors that affect auto insurance rates, make note of the features that are most important to you as you shop around. Be prepared to share the amount of coverage you need and your preferred deductible so you can secure comparable quotes.
It is illegal to drive in Canada without the minimum amount of third-party liability insurance. If you’re caught driving without insurance, you can face penalties such as a fine and/or a licence suspension. And if you have an accident, the real costs of inadequate coverage can range from hundreds to millions of dollars, depending on the outcome. Luckily, today’s auto insurance quotes typically already include the minimum coverage requirements.
With the standard minimum of $200,000 in third-party car insurance mandated by most provinces, many insurance companies offer coverage on third-party damages and injuries while operating a rental car. This is done through an endorsement and must be selected on your policy. In Ontario, the additional coverage to rent a car is detailed in the Ontario Policy Change Form 27 (OPCF 27), while in Alberta, it’s in the Standard Endorsement Form 27 (SEF 27).
It’s important to check what’s included in your policy. If your coverage doesn’t extend to car rentals, you may want to consider purchasing that additional coverage. This can usually be done through the rental car company, and some credit cards cover collisions. Let the rental company and your insurance provider know where you’ll be operating the vehicle—whether you will be staying within Canada or driving to the U.S. or Mexico.
If you are responsible for an accident, anyone affected by the damage of the accident can make a claim to seek repairs and/or medical treatment for injuries. You will have to provide your insurance details to the other party involved in the accident. Both parties should take photos and notes to record all the details, including time, location, names and contact information for everyone involved.
Different provinces and policies have varying protocols on who covers the costs of repairs and/or personal injury treatment while the claim is being assessed (typically, it’s either the third party or their insurance company). Then, a final decision is made by the claims adjustor, and your insurance provider settles the claim. If the claimant is not satisfied, they could choose to pursue legal action.
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I hope you will write an article about car rentals using a credit card for insurance vs using an endorsement on one’s existing policy. what are the pros and cons? Would a credit card cover me if I was alone and hit a tree and injured myself, or if another driver hit me but didn’t have insurance? I sometimes rent cars when I go to the US.
While the article is correct that calculating the premiums is complicated, it would be helpful if someone would post typical premiums at the various coverage levels – $200,000; $1,000,000; $2,000,000; $3,000,000; $4,000,000; $5,000,000 to illustrate how extra coverage costs. (It goes up by less and less, because large claims are uncommon.)
Also, it would be helpful to know what the biggest claim has been in BC and in Canada, historically. Various agents recommend a minimum of one, two, or five million coverage.
Also, in B.C. the government-controlled insurer, ICBC, says the insurance does not cover you in certain circumstances such as being intoxicated. How many cases have there been where people bought insurance but nevertheless went bankrupt and lost their homes because of this?
Due to the large volume of comments we receive, we regret that we are unable to respond directly to each one. We invite you to email your question to [email protected], where it will be considered for a future response by one of our expert columnists. For personal advice, we suggest consulting with your financial institution or a qualified advisor.