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Every mistake has a cost. Small mistakes can cost you the time it takes to correct them. Maybe they will embarrass you. It can cost you a bit of money if you have to pay to repair or replace an item that you accidentally damaged.
As the scope of an error increases, so do the costs and consequences. For example, if you are involved in a serious car accident and are partially or fully at fault, paying for the injuries and damages caused by your mistake can be very costly. This is why we all need to have auto insurance if we own a car. Mistakes happen. But we must take reasonable steps to ensure that these mistakes do not cripple our families financially.
In this blog post, I explore liability insurance and explain why not choosing the right coverage for you and your family is a mistake you don’t want to make.
What is liability insurance?
Third Party Liability Insurance (TPL) covers you and others who drive your car with your permission if claims are made for damage caused to someone else (the third party). These include claims for property damage, bodily injury or death.
TPL is part of the standard insurance policy that all owners of “automobiles” (including cars, trucks, motorcycles, snowmobiles, etc.) in Ontario must have. The Ontario auto policy includes a mandatory minimum of $ 200,000 in TPL coverage, but that minimum is not enough. In fact, the vast majority of people have TPL coverage of at least $ 1,000,000. As we will see below, you should really ask your insurance company or broker to increase this limit to an amount appropriate for you and your family. In addition to any damage suffered by a third party, TPL covers the costs of the insurance company hiring a lawyer to defend the claim against you. This means that if you are found guilty of an accident and are successfully sued for damages, TPL will pay for these damages, up to the amount of coverage you have in the policy,
In in addition to legal costs incurred in defending the claim.
It is important to understand that the TPL does not only cover claims from foreigners. Passengers in your vehicle, including family members, may have to sue if the driver of your vehicle damages them. You may even have to file a complaint against your own TPL if you are injured as a passenger in your own vehicle!
What other coverage do I have?
All Ontario vehicle owners must have an insurance policy that provides three other types of mandatory minimum coverage. The first type, called accident benefits, is described in the Statutory Accident Benefits Schedule (SABS). These benefits, also known as âno-fault benefitsâ, include income replacement, attendant care, medical and rehabilitation costs and other benefits up to certain maximum amounts and subject to numerous rules and restrictions. These benefits are available to you and your family members covered by the policy, and potentially to others involved in an accident with your vehicle, regardless of who is responsible for the accident.
Unfortunately, in recent years, the Ontario government has dramatically reduced the amount of no-fault coverage of the standard auto insurance policy. In a future blog post, I will explain in more detail the changes to SABS and the types of additional optional benefits you should consider purchasing to protect yourself and your family from these reductions imposed by. the government.
The second type of mandatory coverage, Direct Property Damage Compensation, covers damage to your vehicle and certain property in your car if you are involved in a collision in Ontario with at least one other insured vehicle and you are not. are not entirely responsible.
Finally, the third type of mandatory coverage that all vehicle owners in Ontario must have on their policy is called âuninsured auto coverageâ. This type of coverage protects you if you are involved in an accident with an unidentified vehicle (for example, a hit-and-run accident) or with an uninsured driver that causes vehicle damage, bodily injury or death to you. or to a member of your family. This uninsured coverage is available up to a maximum of $ 200,000.
While every vehicle owner should have all of the mandatory coverages, there are many additional optional coverages that responsible owners should consider purchasing. Generally speaking, these optional covers are relatively inexpensive. While no one expects anything serious to happen to them, the reality is that you probably know someone who has been in a serious accident. Mandatory coverages, combined with some additional optional coverages, can mean the difference between financial security and financial ruin for your family.
What is the Family Protection Rider?
People can (and should) purchase optional coverage or endorsements to enhance their standard auto insurance policies. These endorsements provide important additional coverage and protection.
One type of optional coverage that everyone should consider purchasing is called the Family Protection Rider. In fact, most insurers or brokers will add it to your policy even if you don’t ask for it – this is also important.
This part of the policy provides protection if you (or certain members of your family) have been injured as a result of the negligence of an âunderinsuredâ or unidentified driver. A driver is considered âunderinsuredâ if their insurance limits are lower than the limits of your family protection rider. For example, if you and your family are involved in an accident and suffer $ 500,000 in damages, but the driver at fault has only $ 200,000 in TPL coverage, you will only be able to collect $ 200,000 from the company. insurance of this driver. However, if you have a $ 1,000,000 Family Protection Rider, you could recover the otherwise unpaid $ 300,000 owed from your own insurance company. It is vital protection for you and your family.
It is important to understand that the limit on your Family Protection Rider is usually the same as the limit you choose for your TPL. So if you choose to purchase a lower amount of TPL, you will also purchase a lower amount for the Family Protection Rider. This begs the question: how much is enough?
How many do you need?
Two hundred thousand dollars ($ 200,000) sounds like a lot of money because it is a lot of money in many circumstances. Unfortunately, when it comes to serious, debilitating, catastrophic injuries or deaths from traffic accidents, or even modest injuries and damages, that amount of coverage runs out very quickly. If there are several people involved in the accident, the situation is even worse. In short, $ 200,000 is not enough insurance for anyone. Remember that you are personally responsible for any damage you cause beyond the limits of your insurance. If the claims against you are worth more than the coverage you bought, the victim (s) may sell your home or other property. They can seize your salary. They can force you out of business.
Most Ontarians have an AWL of $ 1,000,000, which means they also have $ 1,000,000 in Family Protection Rider coverage. This amount was sufficient for most people, but unfortunately this is no longer the case. One important reason for this is the recent reduction in accident benefits available. Your TPL is intended to cover all damages and losses that have not already been paid to the victim by other available insurance, including accident benefits. Previously, each victim received $ 172,000 in benefits to cover medical treatment, rehabilitation and care. If a victim was catastrophically injured, they previously had $ 2,000,000 in coverage for these expenses. These available benefits meant that a TPL of $ 1,000,000 was generally sufficient to cover the victim’s additional loss and damage.
The Ontario government has reduced these benefits for most victims to just $ 3,500! In some cases, this can be increased to $ 65,000; much less than the $ 172,000 that was previously available. For those who have suffered catastrophic injuries, benefits have been cut in half, to just $ 1,000,000! What this means in practical terms is that those who make a mistake and cause an accident are now potentially at the mercy of much more damage than they were when benefits were at higher levels.
As a result, insurance experts generally recommend having $ 2 million in TPL. Anyone with significant assets should consider purchasing an âumbrella policyâ in conjunction with their home insurance for $ 5 million. Surprisingly, the difference in cost between a $ 1 million policy and a $ 2 million policy is not significant. Plus, the added benefit is that you then have the highest limit for your Family Protection Rider. By purchasing this additional coverage, you are effectively protecting your family twice.
If your budget is tight, you might be tempted to pay less per month to keep the bare minimum required by law. But it could cost you dearly if you ever have a serious accident. If possible, consider spending the extra few dollars that will protect you properly. Rather than focusing on the small difference in the Cost of your insurance premium, think about value of this additional protection and what it could be value to you and your loved ones. How much is peace of mind worth to you? Mistakes happen and we urge you to protect yourself and your family.
I hope you will never be involved in an accident. Hope you never get legal action against yourself for causing harm to someone else. Hopefully you and your family will never be seriously injured in a car accident. But if by any chance you are faced with this unfortunate event, you will be glad you paid a little more in insurance premiums to protect yourself with that much needed additional coverage.
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.