There is a lot of insurance specific vocabulary and some of it can be confusing or unclear. In this post, we’re going to elaborate on one of the most common and most important insurance terms – third party liability.

Third party liability definition

3^rd party refers to a party other than yourself or the insured. Third party insurance or third party liability refers to coverage in the event that someone else is affected by you. It protects and covers you against liability when damage, injury or destruction happens to others or to their property and you are at fault. In auto insurance parlance, this is also sometimes referred to as Personal Liability and Property Damage or PLPD. If you have a lawsuit against you, any resultant claims will be covered and settled (up to the limit of your coverage of course).

Third party liability and auto insurance

In Ontario, to have coverage for third party liability is not an option when it comes to car insurance – the Canadian government requires that all insured vehicles have this coverage. The minimum necessary is $200,000. However, many people do opt for a higher amount of coverage to ensure that they are protected in the event they are responsible for a major accident. Costs and expenses can quickly skyrocket and it is for this reason that many opt for a higher amount, such as 1 or 2 million dollars.

It is also possible to only go for one way auto insurance coverage, but this also carries its own risks that might outweigh any potential cost savings. 

When you’re looking for cheap auto insurance, your instinct might be to cut corners whenever possible, but it is important to understand the ramifications of lesser coverage.

If you’re unsure which direction you should take with third party liability or if you’d like to learn more about the pros and cons of coverage that goes higher than what is mandated by the government, someone from our team would be happy to talk things through with you. Reach out anytime.

For more information on auto insurance in Ontario, check out the information put together by the Financial Services Commission of Ontario here.

Have some other insurance jargon on your radar that you’d like clarified? Check out our blog posts defining common terms and peruse our full glossary of insurance terms here.

We have provided the definitions in this blog post for general information purposes only. They are not meant to be complete descriptions to cover any and all terms, conditions and exclusions that are found in different insurance policies. If there is any inconsistency between this information and the definitions in your policy, it is your policy that governs. Contact your insurance broker if you have any questions or need any clarification about your particular policy and the definitions therein.

Image source: FreeDigitalPhotos.net | Stuart Miles