First Party Insurance

What Does First Party Insurance Mean?

First-party insurance protects the policyholder or their property. It differs from third-party insurance, which covers losses incurred by someone other than the policyholder, such as in the case of a car crash involving the policyholder or when individuals receive coverage provided by an employer.

Insuranceopedia Explains First Party Insurance

Many insurance policies provide coverage for third parties. For example, the bodily injury and property damage coverage on an auto insurance policy will cover harm caused to another driver or damage to another person’s property.

With first-party insurance, however, the policyholder is the named insured, meaning that the person purchasing the policy is also the one covered by it. If the insured suffers a loss, they file a claim with their insurer to receive the compensation they are entitled to under the policy. Since the contract is between the insured and the insurance company only, it establishes specific fiduciary duties and obligations that the insurer owes to the insured, such as the duty to act in good faith.