While the standard limit is $1 million, if you are sued for more than the limits of your policy, you may need to hire a lawyer at your expense to protect yourself against additional judgment. Because these costs are increasing, we recommend you carry a $2 million liability limit to properly protect you from having to pay for these expenses out of pocket.
Why $2 million is better than $1 million
Unfortunately, a momentary lapse in judgement can result in a tragic accident. Medical bills add up quickly when someone is in critical condition, their long-term medication or rehabilitation can be extremely costly, vehicles are full of expensive bells and whistles that need to be replaced and damage to city or private property can be expensive to replace.
If you are sued for more than the limits of your policy (for example, $1.7 million and your policy covers you for $1 million), you may need to hire a lawyer at your expense to protect yourself against additional judgment. You are liable for expenses above and beyond your policy’s limits.
At this point, you’re probably thinking that this extra protection will cost you a lot more. This simply isn’t the case! Most insurance companies that we work with offer to upgrade your liability coverage from 1 to 2 for under $300 a year, that works out to merely $25 a month. You can ensure that you are properly protected, without adding a steep monthly cost.
What is Liability?
Third Party Liability Coverage provides protection to you if you are involved in an accident where you are deemed legally liable. It can cover damages to another person for injury or death as well as for damage to another person's vehicle or property.
For example, if you were to accidentally rear end someone else’s car, and you damaged their car and injured the driver, the driver could make a claim against you for their losses. In this case, your liability coverage would protect you from having to pay the medical expenses, repair costs of the vehicle and the drivers lost wages if they were unable to work while injured as a result of the accident. Of course, this is just an example, and every insurance policy will disclose the details of the coverage it provides.
How does liability protect you?
Liability coverage is mandatory in Canada, but there is flexibility in how much coverage you carry on your car insurance. Your coverage amount, is how much the insurance company puts up for your defense in the event of an at-fault accident where the victim is suing you for damages.
The legal expenses may be too expensive for you without any liability coverage and the associated fees for settling those claims may be in the range of millions of dollars which you may not be able to afford without your liability insurance. Once a claim goes to court, we all know how quickly those bills rack up.
- Medical costs required by anyone you’ve injured
- Repair costs to vehicles you’ve damaged
- Repair costs to property you’ve damaged
While $1 million is a lot of money, the extra million that takes your coverage to $2 million liability is critical if you are involved in a serious accident where you are at fault. Consult with your broker to see what your insurance company offers in terms of coverage and rate, so that you are properly protected while driving your car!