What is the difference between a first-party claim and a third-party claim?

In line with everything you should know when it comes to how to correctly handle a car accident, navigating the difference between a first-party and a third-party claim is one of the most important.

However, it’s easy once you grasp the basic principles. Knowing whether to file a first-party or third-party claim is crucial and could significantly impact how your claim is handled and your potential compensation. Let’s break it down to understand better.

The Difference Between a First-Party Claim and a Third-Party Claim

In the simplest terms, a first-party claim is when you, as the policyholder, file a claim with your own insurance company after an incident. Conversely, a third-party claim is when you file a claim against another person’s insurance policy, typically because they were at fault for an accident.

These differing claim types dictate who you interact with during the claims process, which coverage applies, and how disputes might be handled. (For more information, read our “What happens if the other driver disputes who is at fault in the accident?“).

Now that we’ve outlined the fundamental differences between first-party and third-party claims, let’s dive into each one in more detail.

An Introduction to First-Party Insurance Claims

A first-party insurance claim refers to a claim you make with your own insurance company. This claim type applies to various insurance coverages, including but not limited to:

• Uninsured Motorist Coverage: This claim kicks in if you’re involved in an accident with a driver who doesn’t carry insurance.
• Underinsured Motorist Coverage: This applies when the other driver’s insurance limits aren’t sufficient to cover the damage or medical expenses, and your provider has to pay out.
• Medical Payment (Med Pay) Policy: Med Pay coverage pays for medical costs after an accident, regardless of who is at fault. This also usually includes anybody else you have in your vehicle at the same time.
• Collision and Comprehensive Coverage: Collision coverage pays for damage to your car after an accident, while comprehensive coverage pays for damage from non-collision-related incidents, such as theft or natural disasters.
• Rental Coverage: If your car is in the shop for repairs after an accident, rental coverage pays for a rental vehicle, making sure you’re still able to commute and live your life until the repairs are completed.
• Towing: If your car needs to be towed after an accident, towing coverage pays for the service. Usually, there are criteria as to how far you can go, whether that’s a local garage, a garage of your choice, or the destination you were trying to get to.

If you’re wondering whether car insurance covers non-accident repairs and other types of damages you’re experiencing, you can read more in our comprehensive guide.

An Example of a First-Party Insurance Claim

Let’s say you’re involved in an accident with an uninsured driver who isn’t covered by one of the best-uninsured motorist (UM) coverage car insurance company policies out there.

They may state that themselves or you might come to find out that this driver was uninsured, and there is no insurance provider to help with your injuries or damage.

Therefore, you’d file a first-party claim with your insurance company under your uninsured motorist coverage. It would handle your repair costs, medical bills, and any other costs related to the accident, ensuring you don’t miss out on your claim payout because the other wasn’t insured.

An Introduction to Third-Party Insurance Claims

A third-party insurance claim involves filing a claim with the at-fault party’s insurance company. This type of claim occurs when you’re not at fault in an accident, and the other party’s insurance is responsible for the damage to your vehicle or any injuries you suffered.

If you have cheap car insurance and you maybe have a policy that only covers third-party payouts, you may not receive anything from a claim you make.

An Example of a Third-Party Insurance Claim

For instance, if another driver rear-ends you at a stop sign and is deemed at fault, you would file a third-party claim with their insurance company. The third party’s insurance company would then be responsible for paying for your vehicle repairs and any associated medical bills. (For more information, read our “What happens if I have a claim against another driver’s insurance company?“).

Case Studies: Understanding First-Party and Third-Party Insurance Claims

Case Study 1: First-Party Insurance Claim

Sarah was driving home when another car suddenly swerved into her lane and collided with her vehicle. Sarah had comprehensive car insurance coverage, which included collision coverage. She contacted her own insurance company and filed a first-party claim.

Her insurance company assessed the damages to her vehicle and covered the repair costs, minus the deductible she had to pay. Since she was not at fault for the accident, her insurance rates did not increase.

Case Study 2: Third-Party Insurance Claim

John was walking across a pedestrian crosswalk when a distracted driver ran a red light and struck him. John sustained injuries and required medical treatment. He obtained the driver’s insurance information and filed a third-party claim with the driver’s insurance company.

The insurance company conducted an investigation and accepted liability for the accident. They covered John’s medical expenses, including hospital bills and physical therapy costs, as well as compensation for his pain and suffering.

Case Study 3: Combined First-Party and Third-Party Claim

Emma’s car was parked on the street when another driver lost control and crashed into her vehicle, causing significant damage. Emma had both collision coverage and uninsured motorist coverage as part of her car insurance policy.

She filed a first-party claim with her own insurance company to cover the repairs to her vehicle. Since the other driver was uninsured, Emma’s uninsured motorist coverage kicked in, and her insurance company pursued a third-party claim against the uninsured driver to recover the costs they had paid out for the repairs.

The Bottom Line on Key Differences Between First-Party and Third-Party Claims

Understanding the distinction between first-party and third-party claims is crucial in the insurance process. It determines who you’ll interact with during the claim process, what coverage applies, and how disputes might be handled.

Knowing your rights and obligations in each scenario can help you navigate the process more efficiently.