Everyone Should Have $2M Automobile Liability Limits

This blog post by Duncan Macgillivray was originally featured on the Ontario Trial Lawyers Association Blog on September 5, 2018.

Automobile liability insurance covers you if you are sued for injuries caused in an automobile accident.  Your insurance company appoints a lawyer, defends you and pays out any damages (up to the liability limits).

In Ontario, the mandatory minimum amount of automobile liability insurance that all drivers must have is $200,000.  However, most drivers have $1M in coverage as it has become the insurance industry standard for insurers and brokers to sell at least $1M in coverage.  That means that your insurer can pay out up to $1M in damages if you are sued (and the plaintiff proves their case).

However, there are two significant reasons why everyone should talk to their broker or insurer and increase their automobile liability insurance to $2M.

The first reason is the more obvious one.  If you are sued, the more coverage you have the better.  With $2M in coverage, you are protected for damages claims up to $2M.  Insurance is about peace of mind and more coverage should equal more peace of mind.

The second reason is less obvious, but, probably more important.  Generally, your liability coverage amount is linked to your OPCF 44R “Underinsured” coverage amount.  So, if you have $2M in liability coverage, you also have $2M in Underinsured coverage.

Having $2M of Underinsured Coverage is very valuable.  Underinsured Coverage protects you (and certain family members) when you are injured in an automobile accident caused by an “underinsured” driver.  An underinsured driver is basically any driver with less liability coverage than your Underinsured Coverage.

An example makes this more clear:

If you are seriously hurt in an accident caused by a driver with $1M in liability coverage and you only have $1M in Underinsured Coverage, then you can only collect up to $1M (from the at-fault driver’s insurer) in damages to pay for your losses (income loss, pain and suffering, future treatment, etc.). 

But, in the same situation, if you have $2M in Underinsured Coverage, you can collect $1M from the at-fault driver’s insurer and then another $1M from your own insurer through the Underinsured Coverage.

If you suffer a large income loss or need significant care or treatment as a result of an automobile accident, having $2M in Underinsured Coverage will provide significant help.  That is especially so given the recent cuts to no-fault Accident Benefits.

The cost of increasing your limits is small.  On my truck, the cost is about $20 a month.  That’s not much to pay for significantly more peace of mind.