I’ve been seeing people talking online about getting one-way insurance, but I don’t really understand what it is. Doesn’t it just mean skipping collision and comprehensive? Is it a good way to save money? – Douglas, Ottawa
Generally, one-way insurance means you’re on your own to repair or replace your car if it’s stolen or you cause a crash.
“One-way insurance is generally considered an auto insurance purchase for the mandatory minimum coverage only,” Brett Weltman, spokesman for the Insurance Bureau of Canada (IBC), said in an email.
There are three main types of car insurance coverage: liability, collision and comprehensive. Liability coverage is mandatory everywhere in Canada. In most provinces, the other two are optional.
- Generally, liability covers damage and injuries that you cause to other people, vehicles or property.
- Collision covers the cost to repair or replace your vehicle if you’re in a collision and you’re at fault.
- Comprehensive covers almost anything else that isn’t a collision, including theft and vandalism.
One-way insurance usually just means you’re skipping the collision and comprehensive, Weltman said.
If you get collision or comprehensive, that’s sometimes called “two-way coverage,” he said.
“In Canada, two-way coverage is most common,” he said. “[Without it], if your vehicle was stolen, damaged by hail or fire or you were at fault in a collision, your vehicle damages are your own responsibility.”
In most of Canada, if you don’t have collision coverage, damage to your car is still covered under basic no-fault insurance coverage if someone hits you and you’re not at fault – although Ontario and Alberta let drivers opt out of that, Weltman said.
Limited terms?
If you haven’t heard of one-way or two-way coverage, you’re not alone – they’re not names most insurance companies regularly use.
“You probably won’t find an insurance person offering [one-way insurance] or talking about it,” said Adam Mitchell, chief executive officer of Whitby, Ont.-based Mitchell & Whale Insurance Brokers Ltd., which operates as Mitch Insurance.
Although some insurance companies mention one-way insurance in blog posts or glossaries of insurance terms, they will usually say it means liability coverage, Mitchell said.
“They translate it to the names we actually use,” he said.
It’s not clear where the names “one-way” and “two-way” came from – and they don’t fit how insurance actually works, Mitchell said.
“One-way sounds like it’s just for the other side [and not for you],” he said. “But you’re not buying insurance for the other guy. The other guy buys insurance for the other guy.”
Whatever you call it, drivers who consider skipping collision and comprehensive coverage are usually trying to lower their monthly insurance payments.
“I don’t think I’ve ever heard a wealthy person say ‘I’m going to buy just the [provincially required] minimum,’” Mitchell said. “It’s usually a budget decision.”
So how much could you save?
IBC’s Weltman said you could cut payments by up to roughly 50 per cent.
But Mitchell said that will vary depending on your driving record and how much it costs to repair or replace your vehicle. Generally, that extra coverage can get pricey for riskier drivers – in Ontario, that includes younger males – who typically already pay more for basic insurance.
For example, the cheapest quote for a fictional 19-year-old Ottawa male with a 2011 Honda Civic and a clean driving record is $2,642 a year – around $220 a month – for basic coverage.
With collision ($1,073) and comprehensive ($23), he’d be paying $3,738 a year – or around $311 a month.
So with basic coverage, he’d save $1,096 a year – or around $91 a month.
With some older vehicles, collision premiums may go up because parts are more scarce. But comprehensive premiums tend to go down because older cars generally cost less to replace.
If you’re worried about an older, cheaper car getting stolen or damaged by hail, for instance, and comprehensive only costs you a few dollars a month, you might decide to get comprehensive but not collision. That’s allowed in most provinces, IBC said.
But if your vehicle is leased or financed, you’re usually required to have both, Mitchell said. “You don’t have the option [to opt out],” he said.
Worth the risk?
Skipping collision or comprehensive is a gamble, Mitchell said.
For example, if your $10,000 car is stolen or written off in an at-fault collision and you don’t have collision or comprehensive coverage, your insurance company won’t give you a penny for it, Mitchell said. So, you’d be on the hook for the full cost of replacing it.
“Can you afford to replace it?” he said. “Do you even need to replace it?”
Collision coverage also covers damage in at-fault collisions – but you’ll have to pay a deductible.
For instance, if you have collision coverage with a $1,000 deductible and your car needs $4,000 in repairs after an at-fault crash, your insurance company will cover $3,000. If you didn’t have collision, you would have to pay the full $4,000.
Skipping it might make sense for an older car that isn’t worth much, Mitchell said.
“If that car is gone tomorrow, is your life impacted?” he said. “If you’ll be fine, then, okay, let’s talk about how much you’ll save.”
Have a driving question? Send it to globedrive@globeandmail.com and put ‘Driving Concerns’ in your subject line. E-mails without the correct subject line may not be answered. Canada’s a big place, so let us know where you are so we can find the answer for your city and province.