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Get the best rates on third-party liability car insurance.

Driving is inherently risky. Even if you’re a careful driver, you can never rule out the possibility you’ll be involved in an accident. That’s why you need to be prepared for the off-chance you cause an accident that results in property damage or injuries. Third-party liability car insurance prevents you from paying for the damage out-of-pocket and is the only type of car insurance that’s mandatory across Canada.


What is third-party liability car insurance?

Driving is inherently risky. Even if you're a careful driver, you can never rule out the possibility you'll be involved in an accident. That's why you must prepare for the off-chance you cause an accident resulting in property damage or injuries. Third-party liability car insurance prevents you from paying for the damage out-of-pocket. It is the only type of car insurance that's mandatory across Canada.

Third-party liability insurance protects you if someone sues you for causing bodily injury or damage to their property in a collision.


What does third-party liability cover?

In Canada, third-party liability insurance kicks in if you're sued for damage to a person's property, injuries, or death. Third-party liability coverage also includes:

The law states you must purchase third-party car insurance if you own a car. It is the minimum amount of insurance you must carry if you own a vehicle in Canada.

But not everyone owns a car. Some people rely on car rentals. How does third-party insurance work, then? Well, if you're using a rental car, the third-party liability insurance minimum coverage that comes with the rental is $200,000. You'll have to purchase extra if you want more than that.

You may think you'll only need to use your third-party liability insurance if you're involved in a car accident — but it offers coverage in many other scenarios, including if you:


What is not covered by third-party liability insurance?

If you’re sued, third-party liability insurance may cover the damage you inflict on other people or their property with your vehicle. It doesn't cover injuries or property damage that you personally incur. Additional insurance coverages cover the risks that third-party liability misses and are available in most provinces and territories.

Mandatory auto insurance coverage

In most provinces, it's mandatory to hold the following coverages in addition to third-party liability:

Accident benefits: Provides financial support for medical expenses if you are injured in a car accident. It can also be put towards funeral expenses if you die in an accident. Purchasing accident benefit coverage in Canada is mandatory, except in Newfoundland and Labrador.

Direct compensation property damage (DCPD): This covers damage to your vehicle when another driver is at fault for the accident. Your insurer will pay you the benefit — you don't have to sue the at-fault driver.

Uninsured driver: Covers costs related to your injury or death after an accident caused by another driver who is either uninsured or unidentified, as in the case of a hit-and-run driver. Keep in mind that this coverage only pays for damage to your vehicle if the uninsured driver can be identified (hit-and-run insurance is a different product and is optional).

Optional auto insurance coverage

The following insurance products are usually listed as optional, broadening standard coverage. You can add them to a policy for an extra fee.

Collision: Covers you if you damage your car in a vehicle rollover or a collision with another car or object. If your car is totalled, collision insurance will pay the replacement cost.

Comprehensive: Covers damages resulting from incidents other than car accidents or collisions. Comprehensive coverage includes protection from extreme weather, vandalism, falling objects, fire, theft, and flooding.

All perils: Provides broad coverage by combining collision and comprehensive insurance.

Endorsements: These are optional products that amend the coverage in a standard policy. Endorsements exist that waive depreciation on claims, provide replacement transportation, remove your policy's glass coverage for a lower premium, and protect your liability when using a rental car service.


How does a third-party car accident claim work in Canada?

Third-party liability claims work differently depending on whether you live in a no-fault or tort-based insurance system.

In a no-fault province, everyone involved deals with their own insurance company. The injured third party will make a claim and receive a benefit from their insurer. If you are the at-fault driver, you must pay your liability coverage's deductible. No one sues to access medical care and car repairs.

In a tort province, the not-at-fault driver may have to sue the at-fault driver for a settlement.

Sometimes both parties are partially to blame for the accident. All the provinces and territories have fault-determination rules that guide the insurers' ultimate decision. For each scenario, varying percentages of fault are assigned (0%, 25%, 50%, 75%, or 100% at-fault, for example). The percentage of fault dictates how much the drivers' respective insurance companies award for physical repairs.

Front view of a car. Illustration.

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Auto insurance quotes are compared from CAA, Coachman Insurance Company, Economical Insurance, Gore Mutual, Onlia Insurance, Pafco, Pembridge, SGI, Travelers, Zenith Insurance Company

FAQs about third-party liability car insurance coverage in Canada.

How can I find the cheapest third-party liability insurance in Canada?

The answer is different for everyone. Insurance companies don’t offer policies at a flat rate because premiums are calculated against the amount of risk you present. If insurers view you as someone who is likely to make many claims against your policy, they will charge you more for coverage than someone who doesn’t pose as much risk.

The best way to find out which brand offers your cheapest policy is to apply for quotes from multiple companies. Rates comparison sites make it easier than ever to do that. lets you compare 50+ insurance companies in three minutes or less.

Also worth noting is that third-party liability insurance is just one of the mandatory coverages that’s automatically included in a standard auto insurance policy. Other components of a standard policy include accident benefits and, occasionally, direct compensation property damage (DCPD). When you apply for third-party insurance, you’re also automatically applying for the latter.

Do I need third-party liability insurance to rent a car?

Yes. In every province and territory, third-party liability insurance is mandatory to operate a car. That also goes for ones you don’t own. Liability insurance is usually included when you rent a car, but only up to the provincial minimum ($200,000 in most cases).

Remember that third-party liability only covers damage you cause to another person or their property. To be covered for damage caused to your rental car, you will need to buy extra insurance, which are often sold as 'waivers.' However, first check if your personal policy and credit card provider already supply these additional coverages. Many credit cards offer rental car insurance. The catch is you need to book the rental with the card to access coverage.

You can also purchase an endorsement for your personal policy that provides legal liability for damage to non-owned automobiles. In Ontario, this endorsement is known as OPCF 27.

Does third party liability insurance cover damage to the other car?

Third party liability coverage covers legal expenses if you're sued after an accident. It can also be used to cover the ensuing settlement, which could include money for physical repairs and medical expenses.

What’s the difference between third party insurance vs comprehensive?

Comprehensive auto insurance coverage protects your vehicle against damage not caused by a collision. Think hail, vandalism and theft, or a tree falling onto your car during a storm. If you own your car, then comprehensive coverage is optional. If you lease or finance your car, then comprehensive coverage is mandatory.

Third party liability insurance, on the other hand, protects you in the event that you’re sued by someone for causing bodily injury or damage to their property in a collision.

How much third-party liability auto insurance do I need?

The minimum recommended amount is $200,000 but you may want to consider buying a larger policy if you know you’re at a greater risk for damage and injury, and especially if any of the following apply to you:

  • You carpool and frequently drive with others in the vehicle.
  • You drive your vehicle for work.
  • You drive in the United States frequently.
  • You drive in a higher risk location (more traffic, cars, higher accident rates).

Repair costs, medical and legal fees add up and can end up costing way more than $200,000.

In other words, if you only have coverage for $200,000 and you’re sued for $1-million, you’ll have to pay the remaining $800,000 out of pocket.

Insurance experts recommend buying a policy worth $500,000 to $1 million.

How much does third-party liability car insurance cost?

It’s tricky to pin down the average cost of third-party liability car insurance.

The price you pay for third-party insurance depends on the make and model of your car, the province you live in, and the cash value of your auto insurance policy.

It’s in your best interest to compare the cost of third-party car insurance from multiple providers before you make a decision. You can search for third party insurance quotes online to see how much you could pay. This is the easiest and cheapest way to secure third party car insurance.

Alexandra Bosanac

Alexandra Bosanac

About the Author

Alexandra Bosanac is the Core Content Manager for Her reporting has appeared in Canadian Business, the Toronto Star, the National Post, and the CBC.

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