While you might think that an insurance claim is an insurance claim, any skilled insurance expert or trucking accident lawyer would tell you there’s a rather significant distinction between first party claims and third party claims. They play a crucial role in settling the outcomes of auto collisions (and other instances where insurance may be called upon to provide money to repair something) so it’s important to understand the differences between the two should the need to distinguish ever arise.
How First And Third Party Differ
This bears explanation first, because it’s important and slips the mind of so many who aren’t constantly immersed in the world of insurance and law — insurance policies are contracts, and the terms “first party” and “third party” refer to the roles individuals involved in these contracts take.
So, when talking about “first party” insurance coverage, we’re referring to insurance that an individual (or group of individuals) obtains to cover injuries to themselves or losses and damages to their personal property. The classic example is automobile insurance, wherein you have personal injury protection, but the designation of first party can also include health insurance, property damage coverage on a home, and certain renter’s insurance policies, among others.
In a first party insurance claim, the policyholder is the first party, and the insurance company acts as the second party. The first party submits their claim, and the second party, following the agreement set out in their contract, would fulfill the claim. For example, a storm damages the first party’s home, they file their claim, then the insurance company pays the first party to cover the cost of the repairs.
Third party insurance claims bring a new player to the proverbial dance floor. In third party instances, individuals and groups purchase insurance to protect against the liability for losses or damage they cause to someone else (or their property). That’s the third party, and they come into play during auto policy liabilities, homeowner’s policies for personal injury, and other situations where one party may cause damage to another and be held responsible.
As you may have deduced, in a third party claim, the claimant typically is not the party that holds the insurance policy. They will file a claim against the insured, after which the insurance company (the second party), will make payments to the third party (whose person or property was damaged) on behalf of the first party (the insurance policyholder).
The differences can be confusing to grasp at first, but as a general rule, remember that first party claims involve an individual and their insurance company, while third party claims involve exactly that — a third party who was damaged by the first party’s negligence, and is seeking financial recompense.