How is first party insurance different from third-party insurance?
Amritesh just bought his brand new sedan, the one whose poster hung on his wall throughout his college life. Buying the car was an easier decision as compared to purchasing a car insurance policy for his sedan. With so many different types of motor insurance plans, Amritesh didn’t know which one he should go for.
In this article, we’ll be discussing the difference between first-party insurance and third-party insurance. Hopefully, this will help our readers like Amritesh in choosing the best motor insurance plan according to their features, suitability, and affordability.
First-party and third-party insurance claims are different in ways to make insurance claims. First-party insurance is a person who files with his or her own insurance company. In comparison, a third-party insurance claim is a person who files with the insurance company of the driver who caused the accident. Third-party insurance claims are also called liability claims.
While many people buy car insurance and homeowners’ insurance policies to protect their property, many do not realize the difference between first-party and third-party insurance. Just because insurance policies are simply contracts at their core, it is important to understand the differences between both parties. Third-party insurance claims are going outside of the insurance provider when searching for compensation.
What is First-Party Insurance?
First-party insurance is a person that covers the losses of the named person on the policy. In first-party insurance, the policyholder is possibly an individual company, or a group of individuals of a particular class like employees of a company, a person’s family, or occupants of a particular vehicle. The policyholder takes a claim against their own insurance policy. Here are the examples of first-party insurance are:
- Under an automobile insurance personal injury protection cover in this policy
- Medical or health insurance
- Medical coverage payment under an automobile or homeowner’s policy
- Unprotected or under-protected motor coverage under an automobile policy
- Damage covered by personal or business property
- Renter’s wall-in insurance coverage
What is a Third-Party Insurance Claim?
Third-party insurance is an insurance policy that protects a person against liability for damages or losses that the third-person caused. In a third-party insurance claim, the policyholder possibly is an individual, a company, or a group of individuals of a particular class. A third-party insurance claim takes their claim when someone makes a claim against someone else’s insurance policy. Here are the examples of third-party insurance are:
- Liability insurance coverage under an automobile policy
- Covers General commercial liability
- Homeowners liability coverage
- Umbrella insurance policies
- Commercial motor vehicle liability coverage
- Animal or canine liability insurance
- Professional liability insurance
- Public liability insurance
- Product liability insurance
- Directors’ and officers’ liability insurance
Difference Between First Party Insurance And Third Party Insurance Claims
An insurance policy is created to add a layer of protection for insured persons as well as third-party persons in an accident. However, there are several ways for the process of first-party and third-party claim. The difference between the first party claim and third party insurance claim process can help you in taking the right path towards the claim settlement. Here are the difference between two:
- The Claimant
The basic difference varies between both the parties involved in raising the car insurance claim. The primary claimant tends to be the policyholder when it comes to the first-party insurance claim, whereas the primary claimant tends to be a third-party person when it comes to third-party insurance claims. Therefore, in different situations the responsibility of registering an insurance claim changes.
- Claim Settlement
The claim settlement is processed by the Motor Accident Claims Tribunal Court in third-party car insurance claims. On the other hand, the claim settlement process is initiated by the insurance company in the event of first-party car insurance.
- Legal Responsibility
Since with an insurance company policyholders entered into a legal agreement, in the case of first-party claims, underthe car insurance policy terms the insurer holds the obligation to provide coverage. While, in the case of third-party claims, the insurance company holds no such obligation to provide any coverage.
First Party and Third party insurance claims have their different purposes. The third party insurance cover is mandatory and takes care of third party liabilities. It includes death, the cost of bodily injuries, and property damage. Third-party insurance is also a reasonable insurance available for cars as it provides the most basic coverage.
On the other hand First-party insurance takes care of own-damage costs in a mishap. It offers coverage for your car in a variety of circumstances including natural and manmade calamities, road accidents, theft, fires and explosions.
Comprehensive insurance plan is an insurance plan that covers both third-party liabilities and own-damage costs under a single premium. They also provide an optional personal accident cover along with the add-ons for additional protection. Thus, the best choice of car insurance, if not the most affordable one, for Amritesh is a comprehensive car insurance.