Auto Liability FAQ

What is auto liability insurance?

Liability insurance covers the cost of damages (for accident benefits, medical costs, lawsuits and awards) in the event of personal injury or death from an accident involving the insured party. In other words, you are financially protected if you are held liable for an injury or loss by others arising from the operation of your vehicle.

What is no-fault insurance?

Many provinces in Canada now have some level of no-fault insurance in which each person’s own insurance company pays for injury or damage up to a certain limit.This applies regardless of whether or not the insured person was at fault. In Quebec and Manitoba, for example, there is a pure no-fault. In Ontario, however, there is a threshold system in which the no-fault clause only applies up to a certain threshold of liability. So, if you are involved in an accident and injured, your own insurance covers the associated costs of treatment, living expenses, loss of work and pain and suffering.

When to consider extra coverage

The recommended level of liability insurance coverage is usually about $1 million.There are some situations in which you might want to increase your liability limit depending on the use of your vehicle. For example, if you drive into the U.S. on a regular basis, where liability settlements are generally higher than in Canada, you might want to consider higher coverage. If you carpool to work or drive groups of children in your car to school or after-school events, you might want to increase your coverage to reflect the higher risks to which you are exposed.

You can purchase an Umbrella Liability Policy that provides additional liability coverage to your home and car insurance. For example, If you have $1 million on your home and $1 million on your car, but don't feel it is sufficient, instead of adding $1 million to each, you can buy an Umbrella Liability Policy for an additional million that covers both. Your vehicle insurance policy likely has some flexibility built in to ensure you are covered in different situations.You should check your policy or ask your broker to be sure.

Renting a car

If you drive a rented car or any vehicle that is not owned by you, your existing vehicle insurance covers physical damage to the vehicle, accident benefits and third-party liability to the same limits that apply in your policy. Note, this is only true if your insurance is issued to you as an individual. If your vehicle insurance is issued to your business, you are not protected when driving non-owned cars. Also, if you rent a luxury car but have a sub-compact insured, you might not be covered for the cost of repairs to the luxury vehicle. In these cases, you should purchase the insurance offered by the renter. If you are a frequent renter, add an endorsement to your car insurance policy. These can be simple to arrange, and far more economical than the costly damage waivers that rental car companies charge.

Traveling outside the province or country

Your insurance will apply if you take your car on short trips to other provinces or into the continental U.S., as long as you engage in normal use of the vehicle.

Moving to another province

If you are relocating long-term or permanently, you must inform your insurer and arrange for new coverage that reflects the risks in your new location.

When the car is “in the shop”

Under most insurance policies, you are not entitled to a replacement vehicle while your car is in the shop for normal maintenance or repair. If you lose the use of your car because of an accident then you might be entitled to a loaned vehicle depending on the situation.

When driving someone else’s car

If you borrow someone else’s car you are covered by the insurance on that car. However, if you are involved in an accident, the owner’s record, not yours will be affected. If you are a regular borrower, ask your broker to arrange a special clause in your policy to cover your use.

When someone else drives your car

Remember that when someone else is driving your car, you are still responsible for it.Any at-fault accidents or claims will go onto your driving record and affect your future premiums.

Don’t guess..

If you are not sure about your coverage, it’s better to give your broker a quick call than to guess. Remember, if you’re not covered and an accident occurs, the insurer is not obliged to pay.

Information about you
  • Names of the drivers of the vehicle to be insured.This usually includes all licensed members of your household since it is assumed that they will use the car. Provide their names as shown on their license, the number of years licensed and the percentage of time they will use the vehicle.
  • Driving records of all applicants will be screened to identify applicants with undesireable driving records.This will include driving convictions in the last three years and accident claims in the last six years.
  • Insurance history for the preceding three to six years must be provided, including any cancelled, declined or refused insurance.
  • License history of all listed drivers must be provided for the preceding six years, including suspensions, cancellations or lapses.
  • In provinces that have public insurance, all required information is already captured by the government.
Information about the vehicle

Full information about the make, model and year are required as well as the Vehicle Identification Number or VIN. Also include the details of a lease if you have one, the purchase value, whether new or used, and the value of any modifications to the vehicle. If any other party has a financial interest in the vehicle this should be recorded so they are protected in the event of a loss.

Information about your coverage requirements

Finally, you will need to provide information of how the vehicle will be used. Is it for pleasure or business? If it is for commuting, what is the daily estimated distance? What will the annual distance be? If for business use, will you be carrying paying passengers, renting the car out to others or transporting any goods? You will also need to indicate your choices regarding your coverage, for example, your preferred deductible, liability limit and coverage for any special situations, including storing the car or driving in the U.S.