What is Auto Liability Insurance? How much do I need- $1M or $2M?

Auto Liability Insurance protects you when you damage another person's property or injure someone while using your vehicle. This does not, however, pay for damages to your property and for your injuries from the accident.

What does Liability Insurance cover?

Bodily Injury
If you are found to be at-fault for an accident and injure someone with your vehicle, your liability insurance will pay for their medical expenses, loss of income, and funeral costs. In addition, lawsuits resulting from the accident will also be covered by liability insurance. 

Property Damage
If you are found to be at-fault for an accident and damage someone else's property, your liability insurance will pay for the cost to repair their property.

How much Liability Insurance do I need?

The minimum coverage required in Canada is $1 million. However, it is advisable that your liability insurance covers you for $2 million. This is so that if you are sued for an accident wherein you are at-fault, then you have an extra $1 million in insurance to cover this. In Canada, lawsuits can go over $1 million, which can leave you vulnerable if you are only covered for $1 million in liability insurance. 

The minimal cost difference of $1 million coverage compared to $2 million coverage makes the latter a wise decision. It is better to cover all your bases and ensure you are fully protected rather than open yourself up to uncertainty.

Coverage Beyond Auto Liability Insurance

In addition to liability insurance, you may also get additional coverage to protect yourself and your vehicle in case of accidents, storms, fire, and other specified risks. These additional insurance options are optional for vehicles that are fully-owned and free of loans. For vehicles leased or financed, the following insurance coverages are required.

Collision insurance
This pays for your vehicle's repair or replacement when it is damaged from hitting another car or object while driving no matter who is at fault.

Comprehensive insurance 
This pays for your vehicle's repair or replacement when it is stolen or damaged from a non-collision incident. Comprehensive insurance covers incidents involving damage from fire, vandalism, or falling objects such as a tree branch or hail. 

Full Coverage: Liability + Collision + Comprehensive Insurance
Most insurance carriers will offer car owners a full package that carries liability insurance, comprehensive insurance, and collision insurance, which is called Full Coverage or All Perils Insurance.