Do you know how much third-party liability coverage you have in your auto insurance policy?
Do you know how much coverage you should have?
Few people know the answers but they should.
There are two basic types of coverage in a standard auto insurance policy: no-fault and third-party liability.
No-fault coverage is set by the Ontario government.
It means certain benefits or payments are supposed to be paid, regardless of who was at fault in an accident.
Policyholders can purchase enhanced benefit coverage, although few do.
Many wrongly believe that because we have no-fault auto insurance it doesn’t matter who is at fault in an accident.
But fault does matter in several ways, the most important of which relates to negligence lawsuits.
If you are at fault you could become a defendant in a negligence lawsuit and that is where third-party liability coverage comes in.
Third-party coverage is intended to protect those sued for negligence.
The Ontario government requires a minimum of $200,000 of third-party liability coverage but many believe drivers should purchase more insurance.
Although damage awards and settlements in negligence lawsuits average less than $200,000 per claim, there are many auto negligence lawsuits where sums much higher than $200,000 have been paid or awarded.
You won’t read or hear about most of them as most negligence lawsuits are settled prior to trial.
The other reason I am writing about this now is the looming reduction in no-fault accident benefits, which comes into force next month.
No-fault benefits have plummeted since 2010 but there will be further significant drops next month, particularly to the benefits available to those who have suffered catastrophic injuries.
Total benefits available for medical care, rehabilitation and attendant care will be reduced from $2 million to $1 million for those who have suffered catastrophic injuries.
Don’t ask me why the government saw fit to reduce benefits to those who need them most.
With no-fault benefits dropping it is inevitable that amounts claimed in negligence lawsuits will increase.
That’s why this is a good time to think about increasing your third-party liability coverage.
How much coverage do you need? That’s tough to say.
TD Insurance’s website says it is common to have $1 million or more of liability coverage.
The Financial Services Commission of Ontario, the body that regulates the insurance industry in Ontario, tells us that: “The cost to increase your Third-Party Liability coverage to $500,000, $1 million or $2 million is small in most cases.”
Of course, that doesn’t answer the question of how much insurance you need.
The real answer depends on your risk tolerance and how much you have to lose.
There have been settlements and court awards in excess of $5 million, some over $10 million.
Does that mean you need in excess of $10 million of coverage?
Remember, the point of insurance is to protect your assets.
As Bob Dylan said, “When you got nothing, you got nothing to lose”.
If you don’t have much then not having much coverage may not be troubling.
But if you have a home with significant equity or a high-paying job, you might want to have a minimum of $2 million in coverage.
You may want even more coverage to protect all your assets.
The wisest course of action is to speak to an independent insurance broker about your needs.
An independent broker has the expertise to help you understand how much coverage you need.
And if you do increase your coverage you should save money by doing so with umbrella coverage.
*****
Correction and follow-up: My column of April 24 on the Supreme Court of Canada decision striking down a one year minimum drug sentence law should have stated Robert Latimer received a life sentence with no chance of parole for 10 years, not a 25-year sentence.
Also, day parole, while available elsewhere in Canada, is not available in Ontario for sentences under two years.
And, parole for such sentences can vary depending on the province.
vist: http://www.torontosun.com/2016/05/07/check-your-car-insurance
