What Is Auto Liability Insurance and Why Is It Mandatory?
Learn how this foundational coverage protects others and keeps you legally on the road
Auto liability insurance is the minimum level of car insurance you are legally required to carry in every Canadian province and territory. While it does not protect your own vehicle or injuries, it plays a critical role in protecting others from harm you may cause behind the wheel.
If you are responsible for an accident that injures another person or damages their property, liability coverage pays for their losses not yours. That is why it is often described as third-party coverage.
What Auto Liability Insurance Covers
Auto liability insurance is made up of two components:
| Component | What It Covers |
|---|---|
| Bodily Injury Liability | Medical costs, lost wages, or legal claims if you injure someone else |
| Property Damage Liability | Repairs or replacement of someone else’s car or property |
Each province sets a legal minimum coverage limit, but you can (and often should) purchase more than the minimum for greater protection.
Tip: In most provinces, the legal minimum is between $200,000 and $500,000, but many drivers choose $1 million or even $2 million in liability coverage for added peace of mind.
Why Liability Insurance Is Mandatory
The law requires liability coverage because it ensures drivers can take financial responsibility if they cause harm. Without it, accident victims would be left to cover their own medical or repair costs, or pursue compensation through lengthy legal channels.
By making liability coverage mandatory:
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Victims of accidents receive quicker financial support
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Drivers are less likely to face personal bankruptcy from lawsuits
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Legal and healthcare systems face fewer unpaid claims
Liability insurance also acts as a safeguard for you. If you were sued after a serious accident, your policy would help cover legal fees and any court-ordered settlements up to your policy limit.
Who Needs It and When It Matters
Whether you are a first-time car buyer, a daily commuter, or a retiree using your vehicle occasionally, liability insurance is required to register and operate a car. It becomes especially important in situations like:
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Lending your car to someone else
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Driving in unfamiliar areas or bad weather
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Sharing the road with cyclists or pedestrians
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Being involved in multi-vehicle collisions
Even careful drivers can be involved in accidents. Liability insurance provides a financial buffer so a mistake on the road does not turn into a long-term financial hardship.
Liability Coverage Does Not Protect Your Own Vehicle
Liability insurance only covers other people’s losses if you are at fault. It does not pay to repair or replace your own car, nor does it cover theft, vandalism, or natural disasters.
If you want coverage for your own vehicle, you will need to add optional insurance like collision or comprehensive.
A Legal Requirement with Real Financial Benefits
Auto liability insurance is not just a regulatory formality — it is one of the most important protections on your policy. By covering others’ losses, it shields you from large out-of-pocket costs, legal trouble, and the long-term impact of accident-related claims. Even though it does not protect your own car directly, it plays a central role in keeping you financially and legally secure on the road.