Should You Take Only Third-Party Liability Car Insurance?
When it comes to insuring your car, one of the biggest decisions you’ll make is whether to opt for only third-party liability insurance to save money or to go for a more comprehensive policy.
In Canada, every driver is legally required to have at least third-party liability car insurance coverage, but is that really enough to protect you?
Western Financial Group, a 100% Canadian company, can help you navigate your car, home, boat, and business insurance during this period of economic uncertainty.
What to consider about third-party liability car insurance
Choosing the minimum required coverage might save you money upfront, but it also comes with risks that could lead to hefty out-of-pocket expenses if something goes wrong. Let’s take a look at the advantages and disadvantages of taking only third-party liability insurance.
What is third-party liability insurance?
Third-party liability insurance covers damage or injury you cause to other people, their vehicles, or their property while driving your car. This type of insurance does not cover any damage to your own vehicle.
In Canada, provinces have different minimum coverage requirements, usually the liability coverage must be at least $200,000 to $500,000. In Quebec, you must have civil liability coverage of at least $50,000. Many experts recommend carrying at least $1 million to $2 million in liability coverage to protect yourself in case of serious accidents.
If you opt for only third-party liability insurance, you’re basically saying: I’ll cover my own car’s repairs or replacement costs if I get into an accident or if something happens to my vehicle.
If you only have third-party liability car insurance and are at fault in an accident, your insurance company will pay for damages to the other car and any injuries, up to the policy limits. Third-party liability insurance specifically covers damages and injuries to others when you are at fault, but it does not cover any damages to your own vehicle.
Advantages of taking only third-party liability insurance
While it may not provide full protection, third-party liability insurance does have some advantages, mainly in terms of cost and legal compliance.
Lower insurance premiums
One of the biggest reasons people choose only third-party liability insurance is to save money. Since this coverage only pays for damages or injuries to other people, it costs significantly less than comprehensive or collision coverage.
If you drive an older car that isn’t worth much, you may decide that paying for full coverage doesn’t make financial sense.
Legal compliance
In Canada, having third-party liability insurance is mandatory. If you’re looking for the most affordable way to meet legal requirements and get on the road, this is the bare minimum coverage you need.
Good option for secondary or low-value vehicles
If you have an older car that’s already depreciated significantly, repairing it after an accident might not be worth it. Instead, you might prefer to set aside savings for a replacement rather than pay higher premiums for full coverage.
Helps protect you against lawsuits
If you cause an accident that results in injuries or property damage, third-party liability insurance covers the legal costs and settlements. Without it, you could be personally responsible for tens or even hundreds of thousands of dollars in damages.
Disadvantages of only having third-party liability insurance
While the lower cost might seem attractive, having just third-party liability insurance comes with significant risks. If you don’t have coverage for your own vehicle, you could end up paying out of pocket for major repairs or even a total loss.
No coverage for your own car’s damage
The biggest downside to third-party liability insurance is that it doesn’t cover damage to your own car. This means:
- If you crash into a pole, guardrail, or another vehicle, you’re on the hook for repairs.
- If your car is stolen or vandalized, you won’t be compensated.
- If your vehicle is damaged in a fire or natural disaster, you’ll have to pay for repairs or replacement.
For example, imagine you’re driving in icy conditions, lose control, and hit a barrier. With only third-party liability insurance, your insurer won’t pay a cent to fix your car.
Expensive out-of-pocket repairs
If your car is damaged in an accident and it’s your fault, you’ll have to pay for repairs or buy a new car entirely. Even minor repairs, like fixing a dented bumper, can cost hundreds or thousands of dollars.
Now, imagine your car is totalled. Would you have enough savings to replace it? If not, third-party liability insurance alone might not be the best choice.
No protection against theft or vandalism
Car theft is a real concern in Canada, with certain cities reporting an increase in stolen vehicles. If your car gets stolen and you only have third-party liability coverage, you won’t receive any reimbursement from your insurer.
Similarly, if someone keys your car, breaks your windows, or damages your vehicle, you’ll have to cover the costs yourself. Comprehensive insurance covers car theft and is optional car insurance.
No coverage for hit-and-run accidents
If someone hits your parked car and drives away, or if you’re involved in a hit-and-run accident, third-party liability insurance won’t help you. You’d be forced to pay for repairs yourself.
Some provinces have government-run insurance programs or compensation funds for hit-and-run victims, but these are limited and may not fully cover your costs.
5. You may be unable to drive a financed or leased car
If you’re financing or leasing your car, your lender will likely require full coverage, including collision and comprehensive insurance. This means third-party liability insurance alone may not even be an option for you.
What can go wrong? real-life scenarios
Here are some real-life situations where only having third-party liability insurance could leave you in financial trouble:
Scenario 1: You rear-end someone at a red light
- What happens? Your insurance covers damage to the other driver’s car and any medical expenses they incur.
- What about your car? Since you only have liability insurance, you’ll have to pay for your own repairs.
Scenario 2: Your car is stolen
- What happens? Your insurer won’t cover the loss.
- What’s the financial impact? You’ll need to buy a replacement vehicle out of pocket.
Scenario 3: A hailstorm damages your car
- What happens? If you only have liability insurance, you get no coverage for weather-related damage.
- What’s the financial impact? Repairing hail damage could cost thousands, especially if the roof or hood is affected.
Scenario 4: A hit-and-run driver smashes into your parked car
- What happens? You’ll have no coverage unless your province offers specific protection for hit-and-run victims.
- What’s the financial impact? You may need to pay for repairs or scrap the vehicle if the damage is severe.
When does third-party liability insurance make sense?
If you have an older, low-value car that you’re comfortable replacing out of pocket, third-party liability insurance could be a practical way to save on premiums.
If your vehicle is new, financed, or expensive to repair, the risks of having only liability coverage may outweigh the savings.
Final thoughts: Is third-party liability insurance enough?
While third-party liability insurance is the minimum legal requirement, it’s not always the smartest financial decision. One accident, theft, or natural disaster could leave you with a massive out-of-pocket expense.
Before deciding, consider: Can you afford to replace or repair your car if something happens?
Do you drive frequently in high-risk areas?
Is your car valuable enough to warrant full coverage?
If you’re unsure, speaking with an insurance broker can help you weigh your options and find the best balance between affordability and protection.
Want to make sure you’re fully covered? Contact our Western Financial Group today for a free car insurance quote!
5 FAQs about car insurance
What if my friend gets my car into an accident? Whose insurance covers it?
Typically, your car insurance policy will cover the accident if your friend is driving your car and has an accident. Car insurance typically follows the vehicle, not the driver. As long as your friend has your permission to drive the car, you can expect your car insurance policy to cover their accident with your car.
What is an at-fault accident?
If you are involved in an at-fault accident, your insurance company is required to assign the percentage of fault for both parties involved.
How long do tickets and accidents stay on my driving record?
Any traffic infraction, such as speeding or distracted driving, will stay on your driving record for a period of three years from the conviction date, not the offence date. An accident that you caused will stay on your driving record for a total of six years.
Will past driving offences affect my car insurance?
Yes, they can still affect your car insurance premiums after any demerit points are gone. It’s important to ask your car insurance provider about how past offences may (or may not) impact the cost of your premiums.
What’s no-fault car insurance?
No-fault insurance is a type of car insurance that covers medical expenses and lost wages for the policyholder and their passengers no matter who was at fault in an accident. Since each person deals with their own insurer, there is usually no reason for a lawsuit. Typically, lawsuits are permitted when someone suffers catastrophic injuries, when a criminal offense is committed, or when someone is killed. British Columbia, Alberta, British Columbia, Saskatchewan, Manitoba, Ontario, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, and Newfoundland and Labrador, have no-fault car insurance systems. The types of coverage and claims processes in each provincial no-fault systems can vary.
