You forget a pot on the stove and it sets fire to a shared wall; your dog bites a delivery person; your washing machine floods the downstairs neighbours’ apartment: these are all situations where you may be liable for damage caused to others. Whether through negligence or simple bad luck, anyone can be held accountable for the consequences of their actions and have to pay the price. Liability insurance provides coverage against such situations. Read on for answers to your most frequently asked questions.
1. What is liability?
If you’re involved in a loss or collision, a victim or victims may hold you accountable for the damage caused and ask for compensation. In the case of events causing major damage or bodily injury, the amount claimed may be extremely high. For example, if a fire breaks out in your home and spreads to your neighbours’, destroying their property, their insurer may demand that you refund the amount they paid out in compensation.
Liability insurance protects you from financial consequences for which you may be held responsible. If you’re found liable, it generally covers your defence expenses and, if necessary, compensation for the person suing you.
2. Is liability insurance mandatory?
In Canada, the law requires all owners of a motor vehicle to have liability insurance that’s valid in Canada and the United States. Driving without this insurance is a serious offence that can result in a fine and suspension of the driver’s licence.
As for home insurance, liability insurance is optional for residential building owners and tenants.
Having liability insurance is one of the best financial habits to adopt. Not only is it inexpensive, the benefits quickly outweigh the premium costs when you have to make a claim.
3. What does liability insurance included with auto insurance cover?
This insurance is used to cover damage to other vehicles and property, for example, if you lose control of your vehicle on a slippery road and damage a neighbour’s fence. It also covers injuries to other people who aren’t already covered by a public insurance plan.
If you were to be liable, you would have to have coverage for your vehicle through your auto insurance or personally assume the cost of repairs.
4. What does liability insurance included with home insurance cover?
You’ll be offered liability insurance when buying home insurance. It provides coverage for unexpected events involving your home, property and family members. For example, strong winds causing your garden furniture to blow away and break a window on a neighbouring property, a young child tripping and injuring themselves on your property or your pet biting a delivery person.
Did you know?
Liability insurance also covers you for personal activities. This means you’re protected if, say, you collide with a jogger on your bike, you crash into someone while skiing, causing injury, or your child breaks a valuable object at a friend’s house.
5. How much liability insurance do I need?
The minimum coverage amount offered with home insurance is $1 million. This may be insufficient in certain situations, however. Given the low premium costs and the serious expenses that may be involved in legal proceedings, $2 million in coverage is a better option for greater peace of mind. You can ask your insurer to assess your liability insurance needs.
6. Does liability insurance provide coverage outside Canada?
Liability insurance included with home insurance follows you wherever you go. For example, if, during a vacation in Mexico, you forget to turn off a faucet and cause water damage to your rental home, your insurer will cover the indemnity claimed by the lessor.
The coverage included with auto insurance is only valid in Canada and the United States. For better coverage and peace of mind, a $2 million in coverage is possible. Your insurer can help you choose a product that meets your needs.
7. What’s NOT covered by liability insurance?
Liability insurance is designed to protect you from sudden and unexpected events, based on the risk determined by your insurer. This means that intentional damage or damage resulting from criminal activity by the insured is not covered.
You must also inform your insurer of any change that may affect your risk level, for example, if you use your home for work purposes.