You Need Auto Liability Insurance in Canada: It’s the Law

Auto insurance policies provide loss protection in various levels and types. Some forms of auto insurance coverage are optional; one type of auto insurance coverage is required by law for Canadian drivers: liability auto insurance.

What is Auto Liability Insurance?

As the name implies, this type of coverage shields you from financial liability against others’ claims against you that arise from accidents wherein you are at-fault. Auto liability coverage encompasses legal judgements resulting from litigation. Out-of-court settlements to third parties and legal fees incurred in your defence are also covered.

By law, Canadian motorists are required to carry auto liability insurance to protect others against losses they incur in accidents wherein you are at-fault. Legal sanctions for failure to carry liability coverage are severe. Fines, imprisonment, and suspension of your license may be imposed for non-coverage.

Limits of Liability Coverage

Specific monetary limits vary between provinces, but you must carry a minimum dollar amount of liability no matter where you reside. Liability coverage is also available in higher amounts than the law requires.

No-fault Coverage

A relatively new auto insurance product is no-fault coverage. Some Canadian provinces offer this coverage in various levels. With no-fault insurance coverage, each party involved in an accident pays for their own injuries or damages up to a specified maximum. No-fault insurance benefits are paid whether or not you are at-fault.

Manitoba and Quebec have a “pure” no-fault coverage. This means that each party totally absorbs their own losses in an auto-related accident. Ontario employs a “threshold” system wherein no-fault insurance benefits are payable only up to a specified minimum level of liability. In either type of no-fault coverage, accident-related costs such as medical bills, lost wages, or pain and suffering are paid by from your own insurer.

How Much Coverage Do I Need?

The answer to this question is highly dependent upon your personal circumstances. If you use your vehicle for business purposes, higher auto liability insurance limits are advisable. Likewise, those who commute into US territory on a frequent basis are well-advised to obtain higher auto liability insurance limits. This is due to the significantly higher damage settlements and judgements typical for accidents occurring within US borders.

If you frequently transport children or use your vehicle for work carpooling, you should carry higher auto liability coverage limits. This is suggested due to the extra passengers likely to be present inside your car during an accident or collision.

To determine the minimum auto liability coverage required in your province, consult an insurance broker. He or she can also help determine any excess coverage that may be advisable for your particular needs.