Liability Limit: How Much Coverage Should Your Home Policy Carry?

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.

How much personal liability coverage should I have on my home insurance in Canada?#

At least as much as a lawsuit could take from you — which, for most homeowners, is more than the $1 million that comes with a standard Canadian home policy. The Financial Consumer Agency of Canada describes liability coverage as protection against legal liability for injury to other people or damage to their property, including people who visit your home, but its consumer guide doesn't recommend an amount. That decision is yours, and the default is simply what you get if nobody asks.

A practical way to size it: add up what a judgment above your limit could reach — home equity beyond your province's exemption, non-registered savings, and a slice of your wages for years — and carry at least that much. As starting points to discuss with a broker, not a formula:

An umbrella typically costs $200–$300 a year for the first $1 million and $50–$75 for each additional million — estimates from typical Canadian broker pricing, not quotes.

The honest exception: if you rent, have little saved and modest income, $1 million may be genuinely adequate for now. A large limit mostly protects wealth you don't have yet, and a plaintiff's lawyer can't collect from assets that don't exist.

What can a judgment above your limit actually take?#

More than most homeowners expect, because provincial exemptions protect very little home equity. These are the figures in force in the three largest common-law provinces:

Sources: O. Reg. 657/05 and the Wages Act (Ontario); B.C. Reg. 28/98 and the Court Order Enforcement Act (BC); the Civil Enforcement Act and Regulation (Alberta). Ontario's figure has applied since December 19, 2025.

For an Ontario homeowner with equity well above $12,997, the exemption doesn't shelter the house: the Execution Act makes a principal residence subject to seizure and sale once the debtor's equity exceeds the prescribed amount. Your equity, not the exemption, is the number a liability limit has to be measured against.

Why does your liability limit matter?#

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 inexpensive; ask your broker for the exact figure. 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 →