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

The key distinction lies in the relationships and actions involved in each type of claim. A first-party claim involves the insured seeking compensation directly from their own insurance company for damages to their own property or person. This typically occurs when the insured experiences a loss due to a covered event, such as theft or damage to their vehicle, and they are claiming benefits as the direct party affected.

In contrast, a third-party claim is initiated when a third party (someone not directly involved in the insurance contract) seeks compensation from the insured for damages or injuries they claim the insured has caused. In this scenario, the third party holds the insured responsible, and the claim is usually addressed through the liability coverage in the insured's policy.

Understanding this difference is crucial as it informs the process of how claims are filed, who is involved in the negotiation or settlement, and the obligations of the insurance company. This clarity helps insured individuals understand their rights and responsibilities when dealing with different types of claims.