Accidents are a part of life. Property damage and personal injuries are risks faced by every homeowner, condo owner, and tenant. While some incidents result in minor inconveniences, others have serious consequences. Even if it’s unintentional or a fluke accident, you may still be held responsible. Thankfully, personal liability insurance exists to alleviate the financial burden and give you much-needed peace of mind.
But what exactly is personal liability insurance? Is it mandatory? How much do you need? In this article, we’ll answer all these questions and more so that you know what to expect when it comes to personal liability insurance.
What Is Personal Liability Insurance?
Personal liability insurance protects you financially if you cause injury to others or damage their property. Essentially, it provides a safety net in various situations where you might be held responsible for unintentionally causing harm. Along with contents insurance and additional living expenses coverage, this is a standard type of coverage usually included in many Canadian home, condo, and tenant insurance policies.
To give you a sense of what it means to be financially protected by insurance in this type of situation, here’s a list of what expenses personal liability insurance might be able to cover:
- Medical bills for injuries to others
- Legal expenses, including attorney fees and court costs
- Property repair or replacement costs for damage you cause
- Lost wages for injured parties
- Rehabilitation costs for injured parties
- Settlements or judgments in a lawsuit
- Funeral costs in the event of accidental death
Do You Need Personal Liability Insurance in Canada?
While you might not be legally required to have personal liability insurance as a homeowner, condo owner, or tenant, you likely need it for other reasons.
Foremost among these is the potential for significant financial losses. Just consider that between 2017 and 2021, the average liability claim for bodily injury or property damage was $31,663, making it one of the most significant losses experienced by homeowners, second only to claims related to fire and lightning.
Without personal liability insurance, you would bear full financial responsibility for this amount. Could you manage it? If your answer is no, as it likely is for many, then personal liability insurance is a safeguard you can’t afford to overlook.
Another reason you might need personal liability insurance is due to obligations beyond legal mandates, such as those imposed by your landlord or condo association. They will often impose these requirements to lessen their own liability exposure and to mitigate the financial risks linked to potential accidents or damages occurring on or to the property.
Fortunately, as mentioned earlier, personal liability coverage is usually automatically included when you buy home insurance, condo insurance, and tenant insurance in Canada. However, you should always verify this yourself.
How Important is Personal Liability Insurance?
Personal liability is one of the most important types of coverage Canadian homeowners, condo owners, and tenants can have. There are two main reasons for this: personal liability claims can be extremely costly, and they can happen to anyone, at any time.
First off, every year 1 in 1,670 insured homeowners file a liability claim related to the cost of lawsuits for bodily injury or property damage. While claims due to wind, hail, water damage, fire, and theft are far more common, personal liability claims are among the most expensive. Notably, the average claim for bodily injury and property damage is $31,663, whereas liability claims for medical payments and other related expenses average $10,179.
Secondly, personal liabilities are unpredictable by nature, capable of happening to anyone, at any time. In fact, as evidenced by this list of personal liability claim examples, they can range from mundane mishaps to unforeseen accidents with significant repercussions.
- Slip and fall accidents on your property, such as on an icy driveway or a poorly maintained staircase
- Dog bites or attacks by your pet on visitors to your home or neighboring properties
- Accidental fires that spread to your neighbor’s property
- Accidental property damage, such as breaking a neighbor’s window while mowing the lawn or damaging a fence with a fallen tree branch
- Accidents during home maintenance or renovations, like a contractor injuring themselves while working on your property
- Hosting social gatherings or events where guests are injured or their property is damaged
- Tree or branch falls causing damage to neighboring properties or vehicles
- Swimming pool accidents, including drownings or injuries sustained by guests or trespassers
- Grill or fire pit accidents resulting in burns or property damage
- Damage caused to common areas or neighboring units, such as water damage caused by leaving a sink or bathtub running (applicable to tenant and condo insurance)
- Injuries sustained by guests or visitors in common areas (applicable to tenant and condo insurance)
- Damage your pet causes to the building, its common areas, or grounds (applicable to tenant and condo insurance)
- Property damage resulting from renovations or alterations made to your unit without proper authorization (applicable to tenant insurance)
Types of Liability Insurance
When discussing or reading up on this topic, you will likely come across terms like “personal liability insurance,” “third-party liability insurance,” and “civil liability insurance.” To help you differentiate these three specific types of liability insurance, here’s a simplified explanation of each.
Personal Liability Insurance
Personal liability insurance provides financial protection in case you are held responsible for causing an accidental injury or damage to a property. Typically, this term is linked to property insurance, such as home, condo, and tenant insurance policies.
Third-Party Liability Insurance
According to the Financial Services Regulatory Association of Ontario (FSRA), third-party liability insurance “protects you if someone else is killed or injured or their property is damaged.” While this term can be used in both property and auto insurance, it is typically associated with car insurance.
Civil Liability Insurance
Civil liability insurance covers you if something related to your job or something you do in your personal life leads to harm or damage to others. It’s a broadly used term in both personal and commercial insurance.
How Much Personal Liability Coverage Do You Need?
A common recommendation is to get as much personal liability coverage as is needed to cover your net worth. This will ensure you are protected against potential lawsuits that could put your financial livelihood in jeopardy.
If you’re unsure of your net worth, you will need to total up the value of your assets and subtract any of your outstanding debts. This calculation will give you your net worth. You can also follow these steps:
- List your assets and their value (ex. Home, rental properties, land, cars, boats, stocks, bonds, mutual funds, retirement accounts, checking, savings, etc.)
- Add up all of your assets
- List all your debts and financial obligations (ex. Mortgages, car loans, student loans, credit card debt, personal loans, etc.)
- Add up all of your debts
- Subtract the total of your debts from the total of your assets
Besides considering your net worth, check if you are required to have a specific amount of coverage, possibly by your condo association or landlord. While $1,000,000 is often the default amount of personal liability coverage, you may be required to have $2,000,000 in personal liability coverage if you live in a large multi-unit building.
Next Steps: Get Personal Liability Insurance for Less
Personal liability insurance is often included in home, condo, and tenant insurance policies in Canada. Of course, how much coverage you get will depend on your net worth, as well as your budget for insurance, given that more coverage typically results in a higher monthly premium.
To ensure you get the best coverage at the cheapest price, try YouSet. Not only is the platform free to use, but it only takes four minutes for our algorithms to compare prices from multiple insurers and present you with the best option. This means you’ll have the peace of mind of knowing you have the coverage you need, including personal liability coverage, without unnecessarily overspending.