What is Liability Insurance?


In today’s post, we wanted to speak about liability insurance with respect to automobiles and personal property.

Automobile Liability

Automobile liability insurance provides protection in the event that you cause harm or damage to someone else or their property with your vehicle.

It does not provide coverage for your injuries or property damage, and there is no deductible applied to liability coverage.

Personal Liability

Personal liability occurs when there is an accident, whether inside or outside of your home, that results in another person being injured or their property getting damaged by an action or failure to act for which you are held legally responsible for. That means someone needs to sue you and prove you are responsible for their losses.

Similarly to automobile liability insurance, there is no deductible applied in the event of a personal liability insurance claim.

Did you know

  • automobile liability insurance is required in order to legally operate your vehicle
  • if your vehicle is parked on public property (whether it be the road or in a parking lot), it must have automobile liability insurance on it.
  • personal liability is included as part of most property insurance policies, including homeowner’s, condos, tenants, rented dwellings and vacant dwellings.

How Much is Enough?

It’s difficult to know exactly how much liability insurance is enough. In Alberta, the minimum limit required to legally operate a vehicle is only $200,000. However, most Insurers offer limits of $1,000,000 or $2,000,000.

A few years ago, a $1,000,000 limit seemed more than sufficient. However, with continuously rising claim costs, we recommend a limit of $2,000,000 for both your automobile liability insurance as well as your personal insurance. The premium difference in order to increase your limit is minimal (usually less than $50.00 per year per risk).

What if I need More?

It is possible that an automobile liability insurance claim or a personal insurance claim could exceed a $2,000,000 limit. There are also some types of claims, such as libel and slander, where your personal liability will not apply. If you’re looking to increase your liability limit, you could consider a personal umbrella.

What is the purpose of a personal umbrella?

A. It protects you from the rain
B. It provides you a higher level of liability protection through higher limits and broader coverage

Well, technically both answers are right, but for the purpose of this article, we’re going to go with answer B!

A personal umbrella policy can be purchased in addition to your personal automobile and property insurance policies.  As mentioned above, the umbrella policy provides you with a higher level of liability limits as well as broader coverage.

Features of a Personal Umbrella

There are many different features to a personal umbrella policy, and the coverage may vary slightly between Insurance Companies. Some of the most common ones are:

  • Provides protection of up to $5,000,000 in excess of $1,000,000 primary coverage for damages which you are legally obligated to pay due to personal injury or property damage
  • Business pursuits are covered to the same extent as provided in the underlying policy
  • Coverage for recreational items, such as watercraft, motorhomes and motorcycles, is provided where the risks are insured by the Insurance Company
  • Defense, settlement and supplementary payments are covered if not provided under the underlying policy
  • Provides a daily limit for expenses incurred in relation to the law suit, including loss of earnings
  • Drop-down feature gives extra protection against losses not covered under the liability portion of traditional property policies (i.e. libel, slander, etc.)
  • Covers acts or omissions as an officer or member of the Board of Directors of a non-profit organization or corporation
  • World-wide coverage

Risks That Are Not Eligible

As with most insurance products, there are certain risks that are not eligible for the coverage for specific reasons. Some of the most common ones are:

  • The underlying insurance policies carry less than $1,000,000 liability coverage
  • The person has previously been sued for libel or slander
  • Risks with accident or claim frequency, known financial, moral or criminal history
  • The underlying insurance policies are in a company or business name
  • Risks that do not satisfy other underwriting requirements
  • The person’s occupation/profession is considered high risk, including but not limited to:
    • Professional entertainers
    • Broadcasters and journalists
    • Professional athletes
    • Television personalities
    • Politicians

A personal umbrella policy can be set up by completing a simple application, and in some cases, it can be added directly to your existing property insurance policy. 

For more information on your liability limits or to obtain a quote for a personal umbrella, please do not hesitate to contact our Office and we would be more than happy to assist you!

Thank you,

The Costen Insurance Team