Liability Limit

A liability limit is the maximum amount your insurance policy will pay for claims against you arising from a single occurrence. On most Canadian home and auto policies, that number is $1 million — the industry default for decades. The limit caps what the insurer pays, not what a court can award. If a judgment comes in at $2.5 million and your limit is $1 million, the remaining $1.5 million is a personal debt: yours, enforceable against your wages, your home equity, and your non-exempt savings.

Why it matters to you#

The limit is the single most important number on your policy, and most people have never read it. Canadian courts have awarded $10 million and more in catastrophic injury cases — the largest reported motor vehicle awards exceed $18 million — while the standard limit has sat at $1 million since medical costs were a fraction of today's. Your insurer's duty to defend you also generally ends once the limit is paid out, so an above-limit judgment can leave you funding your own lawyers mid-fight. The gap between what a court can award and what your policy will pay is, quite literally, the liability gap.

In practice#

• Where to find it: the declarations page of your policy, usually labelled "Legal Liability" (home) or "Third Party Liability" (auto), with a dollar figure beside it.
• What it typically costs to raise: moving a home or auto policy from $1 million to $2 million is often under $50 per year. A separate umbrella policy — one limit sitting over all your policies — typically costs $200–$300 per year for the first $1 million and roughly $50–$75 per additional $1 million. These are estimates based on typical Canadian broker pricing, not quotes.
• The catch: brokers aren't required to offer more than the default, so higher limits are usually something you have to ask for.

Not sure whether your limit matches what a lawsuit could actually take from you? That's a two-minute question. Take the 2-minute Lawsuit Exposure Quiz →