What’s the deal with one-way auto insurance?

What’s the deal with one-way auto insurance?

One-way insurance policies provide liability, direct compensation property damage (DCPD), and accident benefits coverage. But the payout for damage to your vehicle applies only if you weren't at fault for the collision.

This article has been updated from a previous version.

If you’ve ever heard of so-called “one-way” auto insurance policies, you might be wondering if it’s a good idea and if it saves you money.

The truth is, it really depends on what kind of car you drive and how much risk you’re willing to take on.  The answers to the following questions can help you find out if one-way car insurance is right for you.

What exactly is one-way car insurance?

One-way car insurance policies provide only three types of coverage: liability, direct compensation property damage (DCPD), and accident benefits. If you get into a collision that's your fault, your policy will only pay for damages sustained by the other driver(s).

That means if you hit another car or run off the road, your insurance won’t cover any of the costs associated with repairing or replacing your vehicle — basically, you’ll be on your own.

With one-way insurance, you'll also be without any comprehensive coverage, so if your vehicle falls prey to fire, theft, or some other hazard, you'll have to pay the damages out of pocket.

Of course, the advantage of one-way insurance policies is that they are cheaper than standard “two-way” insurance plans — precisely because they provide a lot less coverage.

Who should consider one-way insurance?

One-way insurance makes sense for budget-conscious drivers who are insuring a car that isn't worth very much. If your car is an older model and you think it will be cheap to repair or replace, then you may not need a standard two-way policy.

Keep in mind that even in this scenario, one-way insurance is not without risk — if your car is stolen or wrecked, you’ll have to cover the cost of buying another vehicle.

What if I have one-way insurance and I get into an accident that isn’t my fault?

In provinces that offer one-way insurance, like Ontario, the DCPD portion of your one-way policy will still cover damage to your vehicle if you get into a collision that is not your fault. However, at least one of the other drivers has to have a policy from a licensed insurance provider in the province or have a signed agreement with your province’s insurance regulator, like the Financial Services Regulatory Authority of Ontario (FSRA), that provides valid coverage.

If you get sued, the liability portion of your one-way policy will cover a judgment against you up to the limit stated in your policy.

How much cheaper is one-way insurance than additional coverage?

The savings you can expect by taking a one-way policy really depend on what kind of car you drive. If there is a lot of collision risk associated with your model, you could be saving substantially on your annual premium by going with a one-way policy, as long as you avoid damage to your vehicle.

One-way policies can also be significantly cheaper than full-coverage policies if you’re insuring a car with a reasonably high replacement valuable. However, the more expensive your car is to repair or replace, the more risk you’re taking on by going with a one-way policy.

Whatever kind of insurance policy you choose, remember to compare quotes from a range of car insurance companies. The cost of both one-way and two-way insurance plans can vary wildly between insurance providers, so it pays to shop around.

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About the author

Thomas Sigsworth

Thomas Sigsworth began his career in Toronto as a television writer and producer. As a long-time writer for LowestRates.ca, Thomas reports on markets and financial products to help people on both sides of the border make better decisions about their money. He holds a Bachelor of Arts degree from Queen’s University in Ontario, Canada as well as a Master’s Degree from Bond University in Queensland, Australia.

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