What is liability insurance?

liability insurance - Personal Insurance

Everything you need to know about liability insurance.

Why do we need liability insurance?

Every day anything can happen to you. Accidents happen quickly. Even if it was involuntary, you may be held responsible and liable for the damages cause to a third party. As we all know lawsuits can be very expensive if you do not have liability insurance and can bankrupt an individual.

When is the coverage valid?

As soon as you insure your personal property or home, your liability insurance comes into effect. If you want to be certain, check the effective date on your insurance policy.  Most contracts are valid for one two year at a time.

What does liability insurance cover?

If you involuntarily cause damages to another individual’s property or the individual himself he or she may ask to be compensated. That is when your liability insurance will protect you. It could also be a situation in which you hurt someone accidentally. For example, your children are playing outside in the snow with the neighbors’ children and you are clearing your driveway with your snowblower. Unfortunately, the children play close to you and the leg of one of the neighbor’s children enters the snow blower, the young child loses his leg. The neighbor could sue you for compensation for his child. If you have home insurance, there is a liability insurance included in it. For automobile insurance, it is an obligatory protection, no contract is issued without no civil liability.

How does liability insurance protect me?

  • If you must go to court, all court fees, including legal fees are included in the coverage.
  • Claim settlement for any receivable claim.

What to declare to the insurer?

When you apply for liability insurance, the insurer will ask you several questions and you must answer them in the most transparent way so that it can assess the civil risk you represent. This will influence the insurer’s approval to protect you or not and the amount of the premium you will have to pay. Here is what is important to report to your insurer when applying for liability insurance:

  • Probability of someone suing you
  • Have you been sued prior to this insurance policy.
  • Your professional activities
  • If you have a certain type of dog


Obviously, if you make false statements, the insurer can cancel the insurance contract. However, the insurer must prove that you voluntarily declared false information. If the insurer has the certainty that you have wrongly represented yourself and can prove it, you can be refused to be defended you in court if the situation happened during your insurance policy.  In that case, you would have to pay for all the damages and losses you have caused. The insurer will have to prove your misinterpretation, otherwise it is obliged to defend you and to pay all the expenses incurred. Honesty is the best policy!


As soon as you are given the approval that a policy can be issued in your name you must pay your premiums. If you do not do this, it is obvious that you will not be covered in the eventuality that a claim is filed in which you are held responsible. The insurer could also send you a formal notice to make your payment as promised otherwise you will be cancelled for non-payment.

What to do if your situation becomes riskier (aggravation of risk)?

It is important to notify your insurer promptly if:

  • Your situation changed since the subscription of your insurance, that it became more at risk.
  • The risk of someone suing you increases.
  • A situation arises and where you can be sued in court.

In the book titled: The General Provisions and Legal Principles of Business Insurance, paragraph explains very well what the insurer’s three options are in the event of a heightened risk that you represent, Article 2467 CCQ. Here are the three possible reactions of the insurance company as described in the article if your situation became more at risk:

  1. It may refuse the changes in the insured’s situation and terminate the policy for aggravation of risk.
  2. It can accept the aggravation of the risk but impose a surcharge on the insured. If the latter accepts and pays the new premium within 30 days, the contract is maintained and includes the new conditions. If the insured refuses or does not express his approval within the next 30 days, the contract can then be terminated by the sole will of the Insurer;
  3. It can accept the declaration of aggravation of the risk without imposing a premium.

If your situation becomes riskier, your insurer could increase the insurance premium to protect you for your current situation. He could also simply cancel your contract if your situation has become too risky. It is important to inform your insurer immediately if there is an aggravation of risk.  The insurer may not cover you by proving that you have not declared your actual situation.

When should you inform your insurer if you are responsible?

As soon as possible! You must inform your insurer if your situation changes or if an accident or situation has occurred. You must call your insurer or send them the information in writing, by sending an explanatory letter.

In what situations can the insurer refuse to pay you?

Even if you submit a claim quickly and, in all honesty, your insurer may not cover you. Below are the situations in which your insurer may refuse to pay:

  • You have notified your insurer too late or not at all.
  • The situation for which you are being sued is not covered in your liability insurance policy.
  • Your action in the situation itself was voluntary, premeditated or criminal.
  • You made false statements when you subscribed.
  • You have engaged in a file, a contract or a situation before having subscribed to your liability insurance

Expiration of your protection

You or the insurer, can at any time, in writing, terminate the insurance contract. In this case, the insurer will reimburse you for the extra amounts you have already paid minus a penalty for short-term cancellation.

What is the difference between civil liability and legal protection?

Legal protection does not include the monetary damages. It allows you to benefit for various legal advice. Civil liability however will pay for the cost of the claim if the claim is viable.

If you have any questions about liability insurance and would like to obtain a quote, do not hesitate to contact one of our experts at Ciccarello Assurances.