Third-Party Auto Insurance

Third-Party Auto Insurance

Written by Priyanka Correia
Fact-checked by Caitlin Wood
Last Updated November 30, 2021

Before you can take your car on the road, it will need to be insured. If you’re ever pulled over by law enforcement, you’ll need to show proof of insurance, otherwise you could find yourself being slapped with a hefty ticket. 

That said, there are different levels of car insurance that you should be aware of, some that are mandatory and others that are more comprehensive and provide more coverage. 

Third-party auto insurance is a required form of auto insurance that you’ll need to take out when you purchase a vehicle. This type of policy is mainly used to cover any medical bills, legal bills, or payments required to repair the vehicles of other drivers if you’re the cause of an accident.

Let’s dig into third-party auto insurance in a little more detail and see what’s included in these policies. 

What Is Third-Party Auto Insurance?

As mentioned, third-party auto insurance is a mandatory type of car insurance that every driver in Canada must have. This coverage pays for various costs that you may incur if you’re ever involved in an accident that’s your fault. The costs that third-party auto insurance policies cover include the following:

  • Costs for repairing another driver’s vehicle as a result of a collision
  • Costs for repairing property that was damaged in a collision
  • Costs for medical treatment for anyone who was injured
  • Disability or death benefits for anyone who was injured
  • Legal fees and litigation as a result of a collision

Collision, Comprehensive, And Third-Party Liability: What’s The Difference?

While you don’t need anything other than basic third-party liability insurance, you do have the option to apply for additional coverage with other types of policies. More specifically, “collision” and “comprehensive” are other types of policies that you may want to consider for added protection. 

The question is, what’s the difference between these policies and a third-party auto insurance policy?

Collision Auto Insurance

This type of car insurance offers coverage for maintaining and repairing your automobile after an accident. It may also cover the cost to replace your car if it’s been subject to extensive damage and is deemed a write-off.

Comprehensive Auto Insurance

This form of auto insurance protects your car if it is damaged as a result of vandalism, fire, theft, falling objects, or natural disasters. 

As you can see, collision and comprehensive policies offer coverage for your car, while third-party liability auto insurance is meant to help pay for damages caused to other vehicles or individuals as a result of an accident that was your fault.

How Much Third-Party Auto Insurance Is Required?

We’ve already established that you need third-party auto insurance in order to lawfully operate a vehicle on the roads in Canada. But exactly how much of this type of insurance is required?

In most provinces, you’ll need a minimum of $200,000 worth of third-party liability coverage. There are, however, some exceptions to this rule. For example, Quebec requires a minimum of $50,000 in coverage. Plus, you’ll be capped at a certain amount for property damage included in this amount.

You also have the opportunity to boost your third-party liability to anywhere from $1 million to $5 million, based on the amount of coverage you prefer to have. But your premiums will be higher as a result of increased coverage. 

Cost Of Third Party Insurance

The cost of third-party auto insurance policy varies quite a bit from one driver to another. The premium price you will pay will depend on a number of factors, such as the following:

  • Your age
  • Your gender
  • Your location
  • Your claims history
  • Your driving record
  • The type of car you drive
  • The number of kilometres you drive per year

How To Reduce The Cost Of Your Third-Party Insurance

While there are certain things you can’t do much about when it comes to reducing the cost of your auto insurance premiums, there are other things that are in your control:

  • Maintain a clean driving record. If you have no history of collisions or tickets, your premiums can be reduced.
  • Drive a lower-cost car. Luxury or sports cars tend to be more expensive to insure.
  • Drive an eco-friendly car. A vehicle that is better for the environment – such as a hybrid – may be subject to a discount.
  • Add security features to your car. The more secure your car is, the lower the risk of theft, which can lower your premiums. 
  • Bundle your policies. If you take out more than one type of policy with the same insurance provider – such as home or life insurance – you may be eligible for a discount. 

Final Thoughts

You can’t get away with not having an auto insurance policy in place. That said, you have a choice between going with a policy that comes with all the bells and whistles and something more basic, like a third-party auto insurance policy. Be sure to speak with an insurance agent to help you determine if this policy is enough for you, or if you require something a bit more comprehensive. 

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Priyanka Correia is a Marketing Coordinator and personal finance expert at Loans Canada. Priyanka completed her Bachelor's degree in Marketing at Concordia University and has published work that has been mentioned in various news media. She is passionate about money management and educating Canadian consumers about how to take control of their financial lives.

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