Does anyone still believe that $200,000 is enough auto liability coverage?

Although Ontario motorists can legally put their vehicles on the road with as little as $200,000 in liability coverage, brokers likely wouldn’t want one of those motorists for a client.

“There is no way you can justify why you sold someone a $200,000 [auto] liability policy,” Rick Orr, Stratford-based owner and account executive at Orr Insurance Brokers Inc., said Friday in an interview.

As a general rule, Orr’s private passenger auto clients carry $2 million in coverage because awards from successful motor vehicle accident lawsuits are sometimes well over $1 million. So the fact that Ontario private passenger vehicle owners are only required by law to buy $200,000 in liability coverage is “totally antiquated,” said Orr, a former president of the Insurance Brokers Association of Ontario.

“It seems odd that nobody has updated it,” said Orr. “We don’t have a single client that would have less than $1 million in liability coverage.”

Orr says it’s not hard for brokers to up-sell to $2 million, partly because the client only has to pay an extra $100 or so a year in premium.

“The last time I looked, which was a long time ago, the [annual premium] difference between $200,000 and $1 million wasn’t much,” he said. “We will get some people who say they don’t need $2 million, but nobody in a long time has ever said they would want less than $1 million in coverage.”

Most brokers realize it would become an errors and omissions risk if they were to sell a client a liability policy with a limit of only $200,000.

“There are all kinds of incentives to make sure consumers are properly protected, because if not, they are coming after us at the end of the day,” Orr said.

Saskatchewan also mandates $200,000 in liability coverage. Unlike Ontario, however, the Saskatchewan government has a monopoly on basic auto through the public insurer SGI. In Saskatchewan, the basic plate coverage has created an issue.

About half the motorists in Saskatchewan have only “base plate coverage,” Dave Pettigrew, president and CEO of brokerage Harvard Western Insurance, told Canadian Underwriter in 2018. At the time, the Insurance Brokers Association of Saskatchewan formed a committee to make sure that motorists in the province were adequately insured.

In Ontario, there is more than one reason to buy liability limits far in excess of the mandatory minimum. “Another reason you should be carrying higher liability coverage is [that] you are actually protecting yourself against people who don’t carry enough,” Orr said Friday.

For example, an optional family protection endorsement provides coverage if the broker’s client gets hurt, sues the at-fault motorist, and the at-fault motorist turns out to be underinsured. As Orr explains, using a hypothetical example: “If I get hit by a 17-year old who has $500,000 or $1 million in coverage, and they do $2 million in damage to me, and I sue them, my [family protection endorsement] will make up the difference to what my liability limit is.”