Who pays if the at-fault driver has insufficient insurance?

What the Law Says

Canada has no federal auto insurance law — regulation is provincial. Most provinces require minimum third-party liability coverage (e.g., $200,000 in Ontario, $200,000–$1M+ elsewhere), but do not mandate underinsured motorist (UIM) coverage. Where offered, UIM is optional and governed by provincial insurance acts and standard policy wordings.

Underinsured motorist coverage is not required by law in any Canadian province. It is an optional endorsement that drivers can purchase to protect themselves if injured by someone whose liability insurance is less than the driver’s own UIM limit.

Provincial insurance statutes (e.g., Ontario’s Insurance Act, R.S.O. 1990, c. I.8; Alberta’s Traffic Safety Act, RSA 2000, c. T-6) set minimum liability limits but are silent on UIM — leaving its availability, scope, and interpretation to policy language and court decisions.

Because UIM coverage is contractual, its application depends on precise wording in the standard automobile policy approved by provincial regulators — and courts interpret those terms strictly.

What Courts Have Said

The Supreme Court of Canada clarified how underinsured motorist coverage applies when multiple insurers or policies are involved — emphasizing that coverage must be interpreted according to the plain meaning of the policy and statutory context.

What to Do

Sources