Third-party liability insurance is a component of all major coverage packages, but many do not fully understand what it is and how it works or what it is for. According to Investopedia, “Liability insurance provides the insured party with protection against claims resulting from injuries and damage to people or property. Liability insurance policies cover both legal costs and any payouts for which the insured party would be responsible if found legally liable.”
Essentially, third-party liability insurance’s function is to protect you against claims made by another party for bodily injury or property damage. Depending on the circumstance, it may provide the funds necessary to for legal expenses and settlement amounts, as well as for medical benefits and costs incurred because of an injury.
Under insurance law, those involved in a liability incident are:
- The first party is the policy holder, or the insured
- The second party is the insurance company, or the provider
- The third party is the other person or party (such as a company) involved in the incident
Types of Third-Party Liability Insurance
Third-party liability insurance has two distinct types, both of which are applied to your policies:
- Bodily injury liability is designed to cover costs resulting from injuries such as pain and suffering, medical care, recovery care, and lost wages. Bodily injury liability insurance will also cover for costs associated with the death of another party.
- Property damage covers for the repairs or replacement of damaged property belonging to the third party.
Third-Party Liability for Your Car Insurance
In Alberta, it is mandatory that all drivers carry a minimum of $200,000 in third-party liability coverage on their car insurance policies, however most people carry much more. This is something we highly recommend given the costs of litigation. In fact, more than 98% of vehicle-owners in Alberta carry at least $1 million in third-party liability insurance.
Some examples of when third-party liability for your car insurance may come into play include:
- You slide on ice and knock over a fence on private property.
- You go off the road and hit a sign on public property.
- You run a red light, hit another vehicle, and injure the passengers and/or driver.
It’s important to remember that your third-party liability insurance will not automatically kick in after reporting incidents like these to your provider. You may be denied coverage if:
- An unlicensed or suspended driver was behind the wheel.
- You were found to have been impaired.
- You were speeding, driving recklessly, or distracted.
- Damage was caused deliberately.
- The vehicle is unregistered.
Third-Party Liability for Your Home Insurance
All home insurance policies include some level of third-party liability coverage. As with car insurance, we recommend a minimum of $1 million on your policy. You may want to consider higher if you have a home-based business, often have guests over, have a swimming pool, or if you have pets.
One of the most common third-party liability claims for homeowners is dog bites. Dogs are considered to be the property of the homeowner, so the homeowner is liable if their pet causes personal injury or property damage. Your homeowners insurance is your most important asset if your dog attacks, and the event doesn’t have to happen on your property.
Other incidences where third-party liability for your home insurance may be required to be used are:
- Slips and falls on your property.
- A house fire causing damage to an adjacent property.
- One of your trees falling and breaking your neighbour’s window.
- You borrow an expensive item from a friend and damage or lose it.
- You are on a sports trip and accidentally injure another person.
A third-party liability claim for home insurance may be denied if you were negligent in the care of your home or property (such as you failed to shovel your walk), or if the incident can be proven to have been done on purpose.
Third-party Liability for Your Business
There are a number of liability options for business owners, each of which protects for something slightly different.
Commercial general liability coverage is essential. It ensures you, your company, and your employees can stay operational if something goes wrong. Without liability coverage, you would be on the hook to pay if your business’s actions — or lack of appropriate actions — cause property damage, injury, illness, death, or other losses.
Other forms of business liability insurance include:
- Professional liability, which protects for if your product or services cause a financial loss.
- Product liability, which protects for if a product you sell causes damage or injury.
- Cyber liability, which protects for if you are the victim of a cyber attack.
- Directors and officers liability, which protects you from liabilities resulting from failure to meet compliance standards or to conduct yourself in accordance with preexisting statutes.
Trust Lane’s for all of Your Alberta Insurance Needs
Lane’s Insurance is a leading Alberta-based brokerage working out of Calgary, Banff, Edmonton and greater Alberta. In addition to extensive customer resources, outstanding claims support and value-added service, Lane’s Insurance helps you save by getting insurers to bid on your business. The end result is fantastic coverage at lower rates.