Types of Car Insurance Liability

Jun 25, 2019

Did you know that an Ontario Auto Policy can have several different types of car insurance coverages? Some coverage is mandatory, and some is optional. Car insurance is complicated; we know! So you might be asking what kind of car insurance liability coverage should you choose. Don’t worry. We’ll break it all down for you here.

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Here are some Mandatory Car Insurance Liability Coverages:

Third Party Liability for Bodily Injury and Property Damage

This liability coverage is mandatory and covers you if you are in an accident and you get sued by a third party when you cause them to be injured catastrophically or if you cause property damage.

The minimum mandatory car insurance liability limit by law is $200,000, although this is highly inadvisable and is rarely sold in real life because it is not enough coverage.  Most people purchase $1 million or $2 million in coverage. Some consumers will purchase $5 million as the liability limit.

Our car insurance liability recommendation here is to figure out how much you are worth now and how much you will ever be worth, and purchase that amount of liability coverage.  The difference between $1 million and $2 million in coverage is roughly $75 per year, so it’s worth it to purchase more.  There is no car insurance deductible for liability coverage.

Direct Compensation Property Damage

This is often referred to as “no-fault” insurance and is largely misunderstood because of that reference. Direct Compensation means exactly that.  If you get into an accident, regardless of who is at fault, you claim from your own insurance company.  This makes the process much easier and reduces legal red tape.

For example, if someone rear-ends you and they are 100% at fault, you can just pick up the phone and call your own broker or insurance company.  If you are not at fault, you don’t have to pay a deductible.  The exception to this is if you injure someone catastrophically (see above) or if you damage some other property (eg., you drive into a lamppost and destroy city property or you drive into someone’s house).  Those situations are covered by auto insurance liability if you get sued.

Direct Compensation Property Damage (DCPD) is a mandatory coverage.  Basically, it is called no fault because regardless of fault, you deal with your own company.

Accident Benefit Coverage

This mandatory coverage is for you and often passengers in your vehicle who become injured in a car accident.  You are covered for Medical and Rehabilitation, Death and Funeral, Dependant Care, Income Replacement and for other help you might need like Attendant Care or Housekeeping and Home Maintenance.  This is where the bulk of auto insurance premiums go towards.  Clients often ask us, “my car is old and not worth very much, why am I paying more for insurance than the car is worth?”.  The answer is that we are insuring the car but also insuring the person.  The car may not have much value but every person is extremely valuable.

Uninsured Automobile

Simply put, this mandatory coverage is for the instance where you get into an accident with someone who is uninsured.  This makes sure that there is still the auto liability coverage you need.

Family Protection Coverage

Commonly referred to as the “44”, this covers for someone else’s underinsurance, very similar to Uninsured Automobile.  If someone you get into an accident with has a low limit of liability, this enables you to sue them for however much liability is on your own policy.

While technically not a mandatory coverage, we’ve never seen a policy without it and it only costs around $30 per year.

Here are some Optional Car Insurance Coverages:

Collision Coverage

This covers you for the damage to your vehicle when you are at fault for an accident or partially at fault.  This is subject to a deductible, usually $500 or $1000.  This coverage is recommended for newer vehicles or cars that still have some value to them.

Our rule of thumb is if the vehicle is over 7 years old or worth less than $3000, then you can consider dropping this coverage.  Otherwise, you should buy this coverage.  The price of this coverage varies quite a bit depending on the year, make and model of your car, your driving record, where you live, etc.

Comprehensive Coverage

This coverage is commonly referred to as “fire and theft,” but it covers much more than that!  Comprehensive coverage also covers glass, vandalism, falling objects and many other things.  Many consumers choose to keep comprehensive coverage even if they drop collision coverage because this coverage is less expensive.

Add-ons & Endorsements

There are many other optional coverages you can add on for a price.  Things like rental car, driving record protector, driving for ridesharing and others are all things you can add on as optional.  We will write another article about these later.  Stay tuned.


The difference between car insurance liability vs full coverage is whether you want to cover your car for collision and/or comprehensive coverage.  Generally consumers will say something like “I want full coverage” or “I want liability only”.  A broker can then advise from there what might be appropriate and make some recommendations.

Still not sure what type of coverage you need? Contact Begin Insurance to speak to a broker. We can give you advice for your specific needs.

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Photo by Per Lööv on Unsplash

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