Are You Increasing Your Liability Insurance Coverage?

By Roger Foisy on May 17th, 2010

Should you be Increasing Your Liability Coverage?

Most Ontario automobile owners purchase higher third party insurance liability limits than the mandatory minimum coverage of $200,000. However, I suggest that the reason a consumer chooses higher coverage (usually $500 thousand or $1 million) is only due to the fact their insurance agent suggests this amount will help keep the overall automobile insurance premium down.

While your insurance representative will be able to help you decide what level of coverage is best for you, it helps to be well-informed about what is available to you before making that call.

The current Ontario law requires that each motor vehicle owner carry a minimum of $200,000. This minimum amount has been in place for decades in Ontario despite the fact that injury awards have increased to keep up with inflation over the years. Take for example, if you were found at-fault for a motor vehicle accident back in 1978 and rendered an accident victim a quadriplegic, the courts would have awarded the injured victim approximately $100,000 for pain and suffering. Of course this award would not include other losses for possible past and future medical and/or income losses.

Despite inflation increasing over time, the Ontario government has failed to adjust the minimum coverage being $200,000.  Did you know that a $100,000 pain and suffering award in 1978 would  now be valued at more than $320,000 (in 2010).

While the law remains that you remain legally liable to carry a minimum of $200,000, you should strongly consider increasing this coverage. The cost to increase your third party liability coverage to $1 million, $2 million or even $3 million is small in most cases.

Personal Injury Case Brief:
Ms. Jones was injured in a motor vehicle collision where Mr. Smith was found to be 100% at-fault. The court awarded Ms. Jones who was 35 years old and employed as an executive secretary earning $45,000 per annum at the time of the collision the following damages:

Pain and Suffering $ 321,000
Past Income Loss $ 71,000
Past Housekeeping $ 46,000
Future Income Loss $ 933,000
Interest on damages $ 43,000

Total Damages  $1,414,000

Mr. Smith carried third party liability coverage of $1 million. Ms. Jones was able to collect personally from Mr. Smith for the additional $414,000.

Had Mr. Smith increased his Third Party Insurance limit to $2 million in this case, he would have saved himself $414,000.

Before you purchase any Third Party Liability coverage, you should check with an insurance broker or other insurance professional.

Upcoming blogs:
• Why an Umbrella Policy may be even a better way of increasing Third Party Insurance Limits.
• Don’t forget to consider increasing your No-fault Insurance Benefits

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