What distinguishes a first-party claim from a third-party claim?

The distinction between a first-party claim and a third-party claim is fundamentally based on who is initiating the claim and against whom the claim is filed. A first-party claim occurs when the insured individual files a claim directly with their own insurance company for coverage of losses or damages they have sustained. This could relate to various types of insurance such as auto, home, or health insurance, where the insured seeks compensation directly from their provider due to a loss they experienced.

On the other hand, a third-party claim is one that is initiated by someone who is not the insured individual but who holds a claim against the insured due to the insured's actions or negligence. For example, if an individual causes an accident, the person who was injured (the third party) can file a claim against the insured’s liability coverage with their insurance company.

Understanding this difference is crucial for insurance professionals because it influences the processes and responsibilities of claims handling, including the potential for legal action, the types of coverage that apply, and how losses are quantified and compensated. This foundational knowledge not only assists in the proper management of claims but also provides clarity in communications with all parties involved.