It is important that one’s decision of their own life is respected.
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This uses one in its sense of a singular third person pronoun for statements that the speaker holds apply to all people. It uses it in the genitive, to talk about the decisions of such people.
It's more often used in a rather formal register, and may seem stuffy to some.
This uses the "epicene their". This is a use of their that refers to a single person in the third person, irrespective of gender. Starting from about 1795, there have been people complaining about this. However, it's been defended for as long, and used by great writers for much longer.
So, as to the two specific things you asked about, both are correct.
However, "…decision of their own life…" is unusual, both in the of and in the singular decision. It suggests perhaps one's judgement of one's own life's story, though it probably means one's several different decisions about what one should do in life. It does neither clearly. Hence "…decisions about their own life…" would be better.
Also, while both one's and their are each okay as they are used here, the switching from one to the other is perhaps better avoided:
Or to make the same statement in the third-person plural:
The correct form is It is important that one's decision about one's own life be respected, and this is not a quotation of the English Royal Family.
The use of "their" has become more and more common. Granted, a second "one's" would be better, but "their" is fine. Again, it depends on the register.