Here’s Why You Need $2 Million Liability Coverage
At any given moment, a car accident can occur resulting in a costly lawsuit. If you don’t have adequate car insurance, you might not be fully covered for the damages. That’s why a $2 million liability limit is important to have.
As a car owner and driver, you are held responsible for your own car insurance. But if you get involved in a car accident that causes injury to the other party, your car insurance policy might not be enough to cover the damages and you could end up paying out-of-pocket expenses. So what is the solution? This is where a $2 million liability coverage can help.
Let’s take a closer look at liability insurance, its main purpose, what is and isn’t covered under liability insurance, the difference between $1 million and $2 million liability insurance, and the reasons why you should get it.
What is liability insurance?
Liability insurance is part of your automobile insurance policy that helps pay for the other driver’s expenses to cover any car damages or bodily injuries they incurred if you are held liable for causing a car accident. Your own liability insurance, however, does not cover your damages.
What is the main purpose of liability insurance?
The main purpose of having liability insurance with your car insurance is knowing that the other driver’s damages are covered if you are deemed at-fault for a car accident. Along with giving you peace of mind, the other main purpose of liability insurance is to provide protection for your assets in case of damages.
What does liability coverage include?
If you get into an at-fault automobile accident, here are the common scenarios where liability coverage takes place:
Property damage. Liability coverage pays for the damages caused to the other driver’s car and any property that was damaged due to the car accident. For instance, replacing business signage on the main intersection where the accident took place.
Bodily injury. This is a typical case where you accidentally hit another vehicle or person causing bodily injury or death. In cases of accidental death, your coverage is assessed based on your car insurance’s policy agreements and how much your liability insurance can cover.
What liability coverage does not cover
Under your liability insurance, the property damages and bodily injury inflicted on the other party involved in a car accident with you are protected. But it does not protect the damages you incur. For instance, if you’re found guilty of being involved in an at-fault accident, you’re responsible to pay out-of-pocket fees for your own damage to your car.
If you get injured, your medical expenses are covered under the mandatory accident benefits on your insurance policy.
If you want your property damages to be covered in the event of an at-fault accident you should have comprehensive coverage or collision coverage, along with liability coverage on your policy. Comprehensive or collision coverage covers the following expenses that liability does not cover:
- Theft of your car
- Vandalism to your car
- Natural disaster causing damage to your car
- Physical damage to your car
- Hit and run
- Damage caused by hitting an object or an animal
What’s the difference between $1 million and $2 million liability insurance?
Now that we have covered what liability insurance doesn’t cover, let’s talk about the difference between $1 million and $2 million liability.
Let’s say you get into an at-fault automobile accident where the settlement against you is for more than $1 million. Your liability policy only covers the $1 million of the settlement. Anything after $1 million you are responsible for paying out-of-pocket.
Getting $2 million liability insurance is a better option, especially, if you want to protect yourself from the cost of all potential damages you are found liable for.
Who should you get liability insurance and how much do you have to pay?
In Canada, all vehicle owners need to have third-party liability coverage. It is mandatory in all provinces and territories. The following is a breakdown of coverage:
- The minimum liability insurance for most provinces is $200,000, but you can increase your coverage to get added protection.
- Having $200,000 liability insurance covers the repair costs, medical bills, and legal costs incurred if you’re responsible for the car accident.
- The cost varies from province to province. However, the monthly average you can expect to pay for monthly liability insurance protection ranging from $600 to $1,600.
- The overall premium rate you will pay depends on the following factors: add-ons you choose to include to your policy, reported annual mileage you drive to and from work, the province you live in, your driving history, and your car’s value, make, and model.
Why Increasing Your Liability to $2 million Is Important
In an event of a car accident where you are found liable if you have a maximum of $1 million on your policy, you could get sued over the limit of your policy if the other party’s damages exceed $1 million. In this case, you might be required to pay out-of-pocket expenses to hire an attorney to protect yourself against additional payments.
Here is a scenario that explains why you should increase your personal liability coverage to $2 million:
You are a defendant in a lawsuit where the plaintiff has suffered serious injuries in a car accident you caused. The court decrees a payout of $1.5 million to the plaintiff. Since you only have a maximum of $1 million liability, your insurer agrees to pay the maximum amount of $1 million. The remaining balance of $500,000 is what you are responsible for paying out to the plaintiff. Where are you going to get $500,000?
That’s why it’s crucial to increase your liability to $2 million. If you had the $2 million liability coverage, the $1.5 million settlement would be covered by your insurer and you wouldn’t be responsible for paying anything. You can’t predict how much the plaintiff’s damages are going to cost. Having a $2 million liability policy best covers the other party’s damages and gives you peace of mind that you won’t have any additional costs.