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Understanding Third-Party Liability Insurance

Third-party liability insurance, also known as legal liability coverage, is coverage under your insurance policy that protects you if you are sued or if you are threatened to be sued for someone's physical injury or damage to someone else’s property. Under third-party liability insurance, you can be covered for expenses related to legal fees and lawsuit settlement costs in the event of a claim made against you. Read on to find out the specific details regarding third-party liability coverage under your home or your car insurance policies.  

Third-Party Liability Coverage: Possible Scenarios

The following are examples of possible scenarios that fall under the third-party liability section of your home and auto insurance:

Home insurance liability coverage: 

  • You cut down a tree on your property that falls on your neighbour or their car. 

  • Someone falls as a result of your poorly maintained stairs. 

Auto insurance liability coverage: 

  • You run a red light and cause injury to the other driver and their passengers. 

  • You accidently back over your neighbour’s child’s bicycle. 

As you can imagine, the above examples are real-world scenarios that do happen and that is why third-party liability coverage is so important under your home and auto insurance policies. Through third-party liability coverage, you can be covered for paying out-of-pocket for the damages and lawsuits brought against you as a result of an accident. 

Third-party Liability Coverage For Renters

If you are renting a house or apartment and you have tenant’s insurance, chances are that third-party liability coverage is included in your insurance policy. However, do not assume that this is always the case - be sure to contact your insurance broker to confirm this. 

Also, be aware that your third-party liability coverage under your home insurance does not mean that you have liability coverage under your car insurance policy in the event that you cause injury to others with your car. 

How Much Liability Coverage Should You Have?

In general, you should have enough liability coverage to protect your financial security in the event of a claim made against you. If your current third-party liability coverage is not enough to cover certain legal and other fees, you will have to pay out-of-pocket to settle the claim. This however can lead you to financial trouble, and even bankruptcy. 

For home insurance liability coverage, most insurance companies will require you to carry at least a $1 million liability limit. Depending on your property, you may be required to have a higher liability limit especially if you have a swimming pool, a swing set, or pets roaming in your backyard.  

Your auto insurance liability coverage should also have a minimum $1 million liability as lawsuits related to car accidents quickly exceed this minimum. Be sure to check what the minimum liability coverage is in your province. 

Also, it is a good idea to have enough liability coverage if you travel to the US where lawsuits are more common and more expensive in comparison to Canada. 

Extra Liability Coverage

If you have a lot of assets that require protection, you might need more liability coverage than the minimum included in your home and car insurance policies. In most cases, insurance companies offer umbrella insurance policies that allow you to extend your third-party liability coverage beyond your current limits. If you require extra liability coverage, be sure to contact your insurance broker to find out if an umbrella policy is right for you. 

If you are looking for third-party liability coverage for your home and car, or if you have questions about our insurance coverage options, please contact us today so that we can meet all of your insurance needs.