Yes, wages could get garnished if someone were found liable. Don't forget that for most young people, their biggest asset is their human capital. I personally have a $2m liability on the car insurance.
As Canadian Capitalist and rookie888 have pointed out, your net worth should not be the determining factor. Having said that, the Insurance Brokers Assoc. of Ontario does say the "usually recommended" amount for Ontario is $1M (which is 5x the legally required minumum by the way.)
Well, your net worth is quite irrelevant. All insurance does is pay out the first X dollars of a judgement, in this case 2 million. If the judgement is for 2.5 million, your current net worth gets torpedoed by 500 thousand.
In Manitoba our Gov't run insurance gives us only 4 choices (200K, 1M, 2M or 5M). Under this system a general rule of thumb is to carry as much 3rd party liability as you can reasonably afford. This year I moved up from 2M to 5M, although I have well under 1M in assets. The change will cost me an extra $17 per year, which I believe I can "reasonably afford".
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