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Why Your Personal Insurance Liability Coverage Needs to be $2 Million

Posted Jun 26th, 2018 in Auto Insurance, Did You Know?, General, Home Insurance, In the News, Insurance Tips, Media

In the blink of an eye, an accident can occur, resulting in potential long-lasting financial distress. This is especially relevant if you don’t have adequate insurance in place. That is why it’s imperative you have a $2 million liability limit or greater on your policy. 

Why Liability Coverage Needs to be $2 Million, Youngs Insurance, Ontario

We recognize the implications of not being adequately insured. At Youngs Insurance Brokers we are recommending that our clients carry a minimum of a $2 million liability limit on both home and car insurance policies to protect their interests.

As your trusted brokerage, we believe it’s our duty to ensure you have superior home and car insurance coverage. On your next renewal, you may notice your liability limit increased to $2 million.

What is Personal Liability Insurance?

In your home insurance policy, there are typically two large coverage categories. These include property coverage and liability coverage. The property portion of your policy covers all the belongings within your house and your house itself. The personal liability portion of your home insurance policy may help to cover medical and legal fees that arise from bodily injury, property damage, or other wrongs as a result of negligent acts or omissions of the insured party. It may also provide coverage for accidental damage you are legally responsible for causing on someone else’s property.

For example, this section of your insurance policy may cover the medical or legal fees if someone slips on ice in your driveway, falls down your stairs, or is bitten by your pet. It covers only civil liabilities and not criminal.

What are Some Common Personal Liability Claims?

Personal liability claims for homeowners often tend to revolve around the following situations:

1.    Incidents involving a pool

2.    Tripping or slipping

3.    Injury after serving guests alcohol

4.    Dog or pet-related injuries

How Does Personal Liability Coverage Protect You?

A personal liability claim could involve medical bills, legal fees, and other charges that could leave you financially responsible. Liability insurance can help cover the legal costs of that defence and help to pay a post-judgment settlement up to the limit of liability you have purchased on your policy.

Why Increasing Your Personal Liability Coverage Limit Is Important

If an accident does occur and you are sued for more than the limits of your policy, you may need to hire a lawyer at your expense to protect yourself against additional judgment. Here is a scenario to help you understand the importance of an increase in personal liability coverage:

In a lawsuit against you, the courts award the plaintiff a judgment of $1.8 million. Taking all costs into account, the Insurer takes on the responsibility of $1 million (as per the policy limit). That leaves a remaining $800,000 that you are personally responsible for.

Now you see how imperative it is that your liability limit be high enough to cover potential expenses because if it's not sufficient, you become personally responsible

How You Can Ensure You Are Protected

Products like a Personal Umbrella Policy provide an extra layer of liability protection and can sometimes be purchased for as little as $15/month. This policy may be better suited for your needs. At any time you can contact your Ontario insurance broker to discuss and/or you can read more about a Personal Umbrella Policy here.

What is Auto Liability Insurance?

Personal liability coverage for your home insurance policy is separate from your auto liability coverage. Auto liability coverage is a mandatory portion of your car insurance policy in Canada. Auto liability insurance will help cover you financially if you are found legally responsible for injury, death, property, or vehicle damage due to a car accident. This means if any drivers, passengers, pedestrians, or property is damaged, your auto liability insurance may cover the cost of legal expenses up to the amount of your policy limit. 

How Much Auto Liability Coverage Should I Have?

Each province specifies the minimum amount of auto liability insurance drivers need. In Ontario, drivers must have a minimum of $200,000 coverage on their auto liability insurance policy. It is often highly recommended to hold higher amounts of coverage to ensure full protection against the possible expenses you may be held responsible for from claims. It is often in a driver’s best interest to have higher liability coverage of up to $2,000,000. This is especially useful for drivers who tend to carpool often or let others drive their vehicles. If you use your vehicle for work or are often found driving in areas with high traffic or accident rates a $2,000,000 liability coverage is likely best for you.

How Important is the Difference Between $1 Million and $2 Million Liability Coverage?

$1 million in liability coverage may sound like a sufficient amount of coverage, but let’s look at an example to clear up just how important it is to have $2 million in liability coverage.

If you were to be involved in a car accident and found to be at fault, the settlement against you could be for more than $1 million. If you only have a liability policy of $1 million, any additional charge above this is something you are fully responsible for paying. So, if the settlement is for $1.5 million, you will be required to pay $500,000 outside of what your insurance company is paying. Having that extra coverage buffer with a $2 million liability insurance policy is the best option to protect yourself financially and ensure you won’t have to pay hundreds of thousands of dollars out of pocket.

 By increasing your home and car insurance liability limits or purchasing a Personal Umbrella Policy, you’re effectively reducing your financial risk, thus providing peace of mind knowing you’re better protected at home and on the road!

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