October 14, 2022

By Brian Babcock

No matter how often we try to explain to clients or others that insurance brokers are the best people to ask, this is probably the question we get most often about insurance.

THE ISSUE

If you are at fault in an accident, your personal assets and income may be seized to pay the amount of any judgment that exceeds your policy limits, so this is a logical concern.

THE ANSWER (SORT OF)

Brokers know what coverage limits are currently available from various insurers, and the cost. Lawyers have a general idea, but not complete knowledge. Relying on our views as the final word would be foolish, because the broker may not be able to find you what we think is “enough” coverage, or it might cost a prohibitive amount.

Since insurance is intended to protect your assets and give you peace of mind, your “needs” are very personal. What assets do you need to protect from an over-limits judgment? Would bankruptcy affect professional licensing? What are your driving habits – do you chauffer the university engineering team, exposing six future multi-millionaires to death or worse, quadriplegia? How much risk can you tolerate?

The risk question is important because no amount of available insurance will provide absolute protection from the highest possible aggregate claims. I know of no insurer that would sell you a $50 million policy. Or would $20 million be enough? Increased accident benefits in Ontario may have reduced the amount of claims, but in extreme situations, they may exceed any sensible limits.

The good news is that the risk of that extreme result is remote.

So the better question is “how much insurance do I practically need?”

The minimum standard limit in Ontario is still $200,000, but only the most reckless or difficult to insure car owners carry that limit. Typically, those are people with very bad driving records who cannot obtain affordable insurance at higher amounts. Most brokers will automatically quote $1,000,000 coverage to an ordinary customer. That is the typical recommendation for the minimum safe coverage.

In my view, $2 million is preferable and can be obtained for $100 or $200 more than $1,000,000 from many insurers, once again depending upon driving record. $5 million would cover all but the most catastrophic injury claims and is desirable but is not available for many people under an auto policy.

CONSIDER AN UMBRELLA IN CASE OF A RAINY DAY

If you want more than $2 million coverage so that you can sleep at night, consider a personal umbrella policy. This is a policy of excess insurance which only responds to catastrophic claims that exceed your base insurance. Not everybody will qualify for a personal umbrella policy. Not every insurer offers them and I am told that they becoming harder to obtain. A $3 million umbrella policy on top of a $2 million automobile policy would provide that $5 million in total coverage. The umbrella portion would also serve as excess insurance for any possible liability claims arising under your homeowners or tenants package (the classic scary example is the reckless teenager jumping off the roof).

These are our suggestions as to what you should discuss with your broker.

It is also helpful to realize that an “agent” sells policies only from one company, while a broker represents multiple companies, so can shop for a wider range of options for you. Many agents are excellent and knowledgeable, and may offer lower prices, but if you are shopping, talking to a broker is always a good idea. See what they have to offer before making a decision.

HOW WEILERS LAW MAY HELP YOU

Weilers Law cannot sell you insurance, but if you are injured in an accident, or need advice because you are being sued and your insurer has sent you an “over limits” letter, give us a call and we might be able to assist you.

We also provide experienced advice in drafting indemnity and insurance clauses for contracts; or even waivers of liability.

We welcome commercial and institutional clients who have questions as to the interpretation of policy wordings.