Which is better: one-way or two-way insurance?

9 minute read Published on May 9, 2024 by BrokerLink Communications

model of yellow car with an umbrella

When you own a car, you want to keep it safe from accidents or unexpected problems. You may be wondering if insuring your vehicle one-way or two-ways is better. Whether you’ve been driving for years or just got your first car, knowing the difference between one-way and two-way car insurance can help you save money and avoid headaches. Let’s start by understanding which option fits you and your car best.

What is one-way car insurance?

One-way car insurance in Canada is the bare minimum auto insurance coverage that covers the costs if you cause damage to someone else’s car or if you injure someone in an accident. It helps pay for the other driver’s vehicle repairs and medical bills if you’re at fault, but it doesn’t cover your own car.

It’s called one-way because the liability protection only goes one way toward the other person involved in the accident, not you. This type of insurance is the legal minimum coverage required by law to drive a car, making sure you can pay for damages you might cause to others. This insurance is often referred to as basic coverage, personal liability property damage, or PLPD coverage; this coverage is mandatory for all drivers, no matter the province.

What does one-way car insurance include?

In Canada, one-way car insurance, also known as mandatory liability car insurance or civil liability coverage, includes third-party liability and accident benefits coverage. This coverage helps pay for other people’s repair costs or medical bills because of an accident you caused. Basic auto insurance also covers you if you get hurt in a crash, but it only pays for your car’s damage in certain situations.

Let’s break down how this coverage works:

Third-party liability coverage

Third-party liability coverage is the main core of one-way car insurance coverage. If you damage someone’s car or property, or if someone gets hurt because of the accident you caused, this part of your insurance helps pay for those costs. This includes:

  • Paying for someone else’s medical treatment if they’re injured
  • Fixing or replacing someone else’s property you damaged
  • Covering your legal costs if the other person decides to take you to court
  • Paying any money the court decides you owe to the other person

Each province in Canada has a minimum amount you must have, with most requiring at least $200,000 in coverage, but you can choose to have more for extra protection. Limits for this can range from $500,000 all the way up to five million.

Accident benefits coverage

This part helps you and anyone in your car at the time of the accident. It doesn’t matter who caused the accident; accident benefits coverage can help pay for the following:

  • Medical costs that are more than what provincial health care covers
  • Money for you if you can’t work because of the accident
  • Funeral costs and money to support families in case someone dies in the accident
  • This ensures you and your passengers get help right away after an accident

In addition, depending on where you live in Canada, your provincial liability insurance coverage may include one or both of the following types of auto insurance coverage:

Uninsured automobile coverage

Uninsured motorist coverage kicks in if the other driver who caused the accident doesn’t have insurance or if it’s a hit-and-run. It helps pay for:

  • Repairs to your car and your things in the car
  • Medical costs or lost income for you and your passengers

It means you won’t be left paying out of pocket if the other driver can’t pay for the damages.

Direct compensation-property damage (DCPD) coverage

This coverage kicks in if the other driver who caused the accident doesn’t have insurance or if it’s a hit-and-run. It helps pay for:

  • Repairs to your car and your things in the car
  • Medical costs or lost income for you and your passengers

It means you won’t be left paying out of pocket if the other driver can’t pay for the damages.

Mandatory liability insurance covers any damage or injuries you cause to others. It also helps pay for your own injuries if you get hurt in a crash. But, if your car or things in it get damaged, the insurance will only pay up to what your policy allows, and only if the accident wasn’t your fault.

What is two-way car insurance?

Two-way car insurance in Canada is a more comprehensive type of insurance that covers not just the damage or injuries you might cause to others but also takes care of your own car, even if you’re at fault. It combines liability coverage, which is mandatory and covers costs if you’re responsible for an accident, with collision and comprehensive coverage, as well as some other endorsements if you choose to add them to your policy.

With two-way insurance, you’re often protected in many more situations than with just basic, one-way car insurance. Let’s break these down:

Collision coverage

Collision coverage is all about taking care of your car if you’re in a crash, whether it’s with another vehicle or something like a light pole or a fence. If your car is damaged in an accident, collision coverage helps pay for the repairs. If the cost to repair the car is more than the car’s value, the insurance might pay out the car's value instead. In cases where the car is totalled, meaning the repair costs exceed the car's value, collision coverage can help cover the cost of replacing your vehicle.

Comprehensive coverage

Comprehensive coverage is like a safety net for almost everything else that could happen to your car outside of driving accidents. It covers scenarios that are out of your control, such as damage to your vehicle due to natural disasters, like earthquakes, floods or hail storms, theft, vandalism, falling objects, like a broken tree branch, and collisions with animals.

In addition to collision and comprehensive coverage, the following additional coverage endorsements are popular add-ons to build a more comprehensive or two-way car insurance policy:

Accident forgiveness coverage

This part of your insurance is like a “no-penalty” pass for your first mistake. If you cause an accident, this coverage means your insurance cost won’t increase because of that first mistake. It’s like the accident never happened, at least in terms of what you pay. You usually need a clean driving record for a few years to get this benefit. Think of it like a bonus for being a safe driver. Just keep in mind that accident forgiveness coverage only works for your first accident where you’re at fault. If it happens again, your insurance cost might increase on renewal as usual.

Loss of use coverage

This part makes sure you’re not stuck without a way to get around if your car is being fixed or replaced. With loss-of-use coverage, if your car is in the shop, it pays for a rental car so you can keep going about your day instead of having to dip into your savings or charge up your credit card to pay for your own rental. Also, if you’d rather not rent a car, it can also cover things like bus fares, Uber, rideshares or taxi rides. However, there’s a limit to how much you can spend per day and in total, so check your policy to understand the limits.

Which should you choose?

Choosing between one-way insurance and two-way insurance in Canada really depends on your situation, like how much your car is worth, how much money you can spend, and how much risk you’re comfortable with. Let’s look at the pros and cons of each to help you decide:

One-way insurance

One-way auto insurance costs less because it covers less, which is good if you’re trying to save money. It also meets the minimum you need to drive legally, covering damage you cause to others and your own injuries.

However, one-way car insurance doesn’t pay for your car’s repairs if you cause the accident, meaning you’ll have to use your money to repair or replace your car.

Two-way insurance

Not only does two-way car insurance cover everything that one-way insurance does, but it also covers damage to your car and things like theft and weather damage. Since two-way insurance protects you against more situations, you’re less likely to face high bills after an accident.

However, the downside of two-way coverage is that it costs more to have. It also requires a deductible for collision and comprehensive coverage, meaning you’ll have to pay the deductible before your insurance providers cover the rest.

Basically, the better option comes down to what you need. One-way insurance is for drivers who want the basics at a lower cost. Two-way insurance is for those who want more coverage and peace of mind, even if it costs a bit more.

How much cheaper is one-way insurance than two-way?

The cost difference between one-way and two-way insurance in Canada can vary greatly depending on several factors, like where you live, the kind of car you drive, your driving history, and how much coverage you choose.

Generally speaking, one-way auto insurance is cheaper than two-way insurance because it offers less coverage. One-way insurance only covers damages you might cause to others, while two-way insurance also covers damages to your own vehicle, whether you’re at fault or not.

To give you a rough idea, your one-way insurance premium could be hundreds of dollars cheaper per year than two-way insurance. However, the exact amount you’ll save by choosing one-way over two-way insurance depends on your specific situation.

It’s always a good idea to get quotes for both types of insurance from a few different insurance companies, either yourself or with the help of an insurance broker, to see how much you would actually save.

When should you switch to one-way insurance?

Is your car getting older? Are you a budget-conscious driver? Having comprehensive two-way car insurance on your car may sound ideal, but there are a few situations where switching to one-way insurance might make more sense for you:

Your car is older

If your car is getting older and isn’t worth much, paying for full coverage might not make sense. If the cost of the insurance and your deductible, the amount you pay before insurance kicks in is more than your car’s value, switching to one-way might make more sense and save you some money.

You can handle repair costs

If you have some money saved up that could cover fixing or replacing your car if something happens, you might be okay with just one-way insurance. Consider whether saving on insurance is worth the risk of paying for big repairs yourself.

You’re looking to save money

If you need to cut back on your monthly bills, going with one-way insurance can help lower your costs. Just make sure you’re okay with the risk that you won’t have help from insurance to fix your car if you’re in an accident.

You rarely drive your car

If you don’t drive much, maybe because you work from home or use your car occasionally, the chances of getting into an accident are lower. In this case, you might feel more confident in not needing the extra coverage.

You’re okay with the risk

Everyone feels differently about risk. If you’re okay with the chance that you might have to pay out of pocket for damages to your car, then one-way insurance could be enough for you.

Final thoughts

Deciding whether to go with one-way or two-way car insurance in Canada comes down to your needs, your car’s value, and how much risk you’re willing to take on. One-way insurance is cheaper and covers the basics, making sure you can pay for damages you cause to others. Two-way insurance costs more but gives you broader protection, covering damages to your own car, too, no matter who’s at fault.

Think about what’s important to you: saving money now with one-way insurance or having more coverage and peace of mind with two-way insurance. Remember, the best choice depends on your personal situation, so consider what you need before making a decision.