Get the best rates on third-party liability car insurance.
Driving is inherently risky. Even if you’re a careful driver, you can never rule out the possibility you’ll be involved in an accident. That’s why you need to be prepared for the off-chance you cause an accident that results in property damage or injuries. Third-party liability car insurance prevents you from paying for the damage out-of-pocket and is the only type of car insurance that’s mandatory across Canada.
What is third-party liability car insurance?
Driving is inherently risky. Even if you're a careful driver, you can never rule out the possibility you'll be involved in an accident. That's why you must prepare for the off-chance you cause an accident resulting in property damage or injuries. Third-party liability car insurance prevents you from paying for the damage out-of-pocket. It is the only type of car insurance that's mandatory across Canada.
Third-party liability insurance protects you if someone sues you for causing bodily injury or damage to their property in a collision.
What does third-party liability cover?
In Canada, third-party liability insurance kicks in if you're sued for damage to a person's property, injuries, or death. Third-party liability coverage also includes:
The law states you must purchase third-party car insurance if you own a car. It is the minimum amount of insurance you must carry if you own a vehicle in Canada.
But not everyone owns a car. Some people rely on car rentals. How does third-party insurance work, then? Well, if you're using a rental car, the third-party liability insurance minimum coverage that comes with the rental is $200,000. You'll have to purchase extra if you want more than that.
You may think you'll only need to use your third-party liability insurance if you're involved in a car accident — but it offers coverage in many other scenarios, including if you:
- Knock over a pole or part of your neighbour's fence while reversing.
- Hit a cyclist or pedestrian, and you get sued for damages, including medical fees.
- In bad weather, lose control of your car, hit something, and damage property.
- Get sued by a passenger in your vehicle.
What is not covered by third-party liability insurance?
If you’re sued, third-party liability insurance may cover the damage you inflict on other people or their property with your vehicle. It doesn't cover injuries or property damage that you personally incur. Additional insurance coverages cover the risks that third-party liability misses and are available in most provinces and territories.
Mandatory auto insurance coverage
In most provinces, it's mandatory to hold the following coverages in addition to third-party liability:
Accident benefits: Provides financial support for medical expenses if you are injured in a car accident. It can also be put towards funeral expenses if you die in an accident. Purchasing accident benefit coverage in Canada is mandatory, except in Newfoundland and Labrador.
Direct compensation property damage (DCPD): This covers damage to your vehicle when another driver is at fault for the accident. Your insurer will pay you the benefit — you don't have to sue the at-fault driver.
Uninsured driver: Covers costs related to your injury or death after an accident caused by another driver who is either uninsured or unidentified, as in the case of a hit-and-run driver. Keep in mind that this coverage only pays for damage to your vehicle if the uninsured driver can be identified (hit-and-run insurance is a different product and is optional).
Optional auto insurance coverage
The following insurance products are usually listed as optional, broadening standard coverage. You can add them to a policy for an extra fee.
Collision: Covers you if you damage your car in a vehicle rollover or a collision with another car or object. If your car is totalled, collision insurance will pay the replacement cost.
Comprehensive: Covers damages resulting from incidents other than car accidents or collisions. Comprehensive coverage includes protection from extreme weather, vandalism, falling objects, fire, theft, and flooding.
All perils: Provides broad coverage by combining collision and comprehensive insurance.
Endorsements: These are optional products that amend the coverage in a standard policy. Endorsements exist that waive depreciation on claims, provide replacement transportation, remove your policy's glass coverage for a lower premium, and protect your liability when using a rental car service.
How does a third-party car accident claim work in Canada?
Third-party liability claims work differently depending on whether you live in a no-fault or tort-based insurance system.
In a no-fault province, everyone involved deals with their own insurance company. The injured third party will make a claim and receive a benefit from their insurer. If you are the at-fault driver, you must pay your liability coverage's deductible. No one sues to access medical care and car repairs.
In a tort province, the not-at-fault driver may have to sue the at-fault driver for a settlement.
Sometimes both parties are partially to blame for the accident. All the provinces and territories have fault-determination rules that guide the insurers' ultimate decision. For each scenario, varying percentages of fault are assigned (0%, 25%, 50%, 75%, or 100% at-fault, for example). The percentage of fault dictates how much the drivers' respective insurance companies award for physical repairs.
