First-Party Vs. Third-Party Claims: What’s The Difference?

 After an accident, you’ll hear insurance adjusters throw around terms like “first-party claim” and “third-party claim.” If you’re like most people, you’ll nod along while having no idea what they’re actually talking about. But here’s the thing: understanding the difference between these two types of claims can dramatically affect how quickly you get paid and how much compensation you receive.

The distinction might sound like legal jargon, but it’s actually pretty straightforward once you break it down. More importantly, knowing which type of claim to file could be the difference between a smooth settlement process and months of frustration.

Below, our friends at Warner & Fitzmartin – Personal Injury Lawyers explain the difference between first and third party claims.

The Basic Difference

A first-party claim is when you file with your own insurance company—the one you’ve been paying premiums to every month. You’re asking them to cover losses under your policy. A third-party claim is when you file against someone else’s insurance because they caused your injuries or damages.

Think of it this way: if you’re claiming against your own policy, it’s first-party. If you’re claiming against the other guy’s policy, it’s third-party.

The terminology comes from contract law. In any insurance arrangement, there are at least two parties: you (the policyholder) and the insurance company. When a third person gets involved—like the driver who rear-ended you—they become the “third party.”

Common First-party Claim Examples

You backed into your mailbox while pulling out of your driveway. Since you caused the damage to your own vehicle, you’d file a collision claim with your auto insurer. That’s a first-party claim.

A pipe burst in your home and flooded your basement. You contact your homeowners insurance to cover the water damage and repairs. Another first-party claim.

Your car was stolen from a parking lot. You file a comprehensive claim with your insurer to recover the vehicle’s value. Still first-party.

In all these situations, you’re relying on coverage you purchased for yourself. The insurance company owes you a contractual duty to cover losses that fall within your policy terms.

Common Third-party Claim Examples

Another driver ran a red light and T-boned your vehicle. You weren’t at fault, so you file a claim against their liability insurance. That’s a third-party claim.

You slipped and fell in a grocery store because an employee mopped the floor without posting warning signs. You file a claim against the store’s liability insurance. Third-party.

A negligent contractor’s work caused damage to your property. You pursue compensation through their professional liability coverage. Also third-party.

The key factor? Someone else was responsible for your damages, and you’re seeking compensation from their insurance policy.

Why The Distinction Matters

An experienced car accident lawyer knows that first-party claims typically move faster. Your insurance company already has your information on file, knows your coverage limits, and has a legal duty to handle your claim promptly. They’re contractually obligated to you.

Third-party claims often take longer and face more resistance. The other person’s insurance company has no direct relationship with you. They’ll investigate thoroughly, question liability, and look for reasons to deny or minimize your claim. They’re protecting their policyholder—not you.

According to industry data, approximately 40% of small businesses will experience a property or liability loss within the next 10 years, highlighting just how common these claims situations become.

The Trade-offs You Should Know

First-party claims come with deductibles. If your policy has a $1,000 deductible, you’ll pay that amount before your insurance covers the rest. And filing a claim—especially an at-fault claim—might increase your premiums at renewal time.

But the speed matters. When your car is totaled and you need transportation for work, waiting months for a third-party insurer to accept liability isn’t practical. Filing with your own insurer gets you compensation faster.

Third-party claims don’t involve deductibles and won’t affect your insurance rates. You’re not filing against your own policy, so there’s no premium impact. The downside? You’re at the mercy of an insurer that has every incentive to pay you as little as possible.

Proving liability also falls entirely on you in a third-party claim. You’ll need police reports, witness statements, photos, medical records, and anything else that demonstrates the other party was at fault. Your own insurer is more likely to take your word for what happened.

When You Might File Both

Sometimes you file both types of claims for the same accident. Let’s say another driver caused a collision, but they only carry minimum liability coverage of $25,000. Your medical bills alone total $50,000.

You’d file a third-party claim against their insurance for the policy limits. Then you’d file a first-party claim under your underinsured motorist coverage to make up the difference. This dual approach maximizes your recovery.

Your insurance company will pay you under your policy, then pursue reimbursement from the at-fault party through subrogation. You get paid faster, and your insurer handles the hassle of recovering from the other driver.

Bad Faith: A First-party Distinction

Here’s something crucial: bad faith claims typically only apply to first-party insurance relationships. If your own insurance company unreasonably denies your valid claim, delays payment without justification, or fails to properly investigate, you may be able to sue them for acting in bad faith.

Third-party insurers don’t owe you the same duty. They represent their policyholder’s interests, not yours. While they can’t outright lie or commit fraud, they have much more latitude to deny claims or offer low settlements without facing bad faith liability.

This is why dealing with your own insurer—even when it means using your own coverage—often provides better leverage and accountability.

Making The Right Choice

Start by identifying who was at fault. If you caused the accident or no one else was involved, a first-party claim with your insurer is your only option. If someone else was clearly responsible and has insurance, you’ll likely pursue a third-party claim.

Check your coverage carefully. Your policy will specify what’s covered, your deductibles, and your limits. Understanding these details helps you decide whether filing with your own insurer makes sense.

Consider the timing. Do you need immediate funds for repairs or medical treatment? Filing with your own insurer provides faster access to money. Can you afford to wait while liability gets sorted out? A third-party claim might net you more money without the deductible.

When in doubt, consult with someone who understands insurance law. The stakes are often high, and making the wrong choice about how to pursue your claim could cost you thousands of dollars or months of unnecessary delays.

The Bottom Line

First-party and third-party claims aren’t interchangeable—they involve different processes, timelines, and outcomes. Understanding which type you’re dealing with helps you set realistic expectations and make smarter decisions about pursuing compensation.

Whether you’re working with your own insurer or fighting with someone else’s, knowing the rules of the game puts you in a stronger position to protect your interests and maximize your recovery.