What is Third Party Liability Insurance and How Much Should You Carry?

Insuring your vehicle can be an overwhelming process. You are bombarded with questions about collision coverage, comprehensive coverage, underinsured motorist protection (UMP), deductibles, road star and on and on and on. The most important type of insurance you receive, however, is called third party liability insurance. Third party liability insurance insures you for the losses that you cause another person as a result of an accident that is your fault. These losses include the damage to the other person’s vehicle, their medical expenses, and for any losses that flow from their personal injuries, including pain and suffering, income loss, etc. As long as you are not in breach of your insurance, your insurer will pay for the injured party’s losses up to the amount of third party insurance you carry. The question is, how much third party liability insurance should you carry?

In BC, the law requires that you carry a minimum of $200,000 in third party liability insurance. You can increase that to $1,000,000, $2,000,000, $3,000,000, or even $5,000,000. It is recommended that you carry more than the minimum $200,000. It is not uncommon for individuals injured in an accident to receive over $200,000 to compensate them for their injuries. If an injured party is entitled to damages exceeding the amount of your third party liability insurance, you may be personally responsible for the excess amount. For example, if you carry $200,000 in third party liability insurance, and you are responsible for an accident that has caused $500,000 in damages, then your insurer will only have to pay $200,000 on your behalf and you are personally responsible for the remaining $300,000. The injured party could collect the remaining $300,000 by going after your personal assets, including your house and your vehicle.

There have been several reported cases in BC where personal injury damages have exceeded what many of us carry in third party liability insurance. Take, for example, the recent decision Wallman v. Doe 2014 BCSC 108. In this case, Dr. Wallman was a 53 year-old emergency room doctor who was injured in a fairly minor collision. Despite the minor nature of the collision, the court found that Dr. Wallman suffered a concussion with debilitating consequences and that he would most likely never be able to return to work. Based largely on Dr. Wallman’s inability to return to work, for which he earned about $346,000 per year, he was awarded over $5,900,000 to compensate him for injuries and losses resulting from this accident. Because of cases such as this, I choose to carry $5,000,000 in third party liability insurance, the maximum amount available through ICBC.

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