What is a First Party claim versus a Third Party claim?
A “first party” policy typically involves insurance that provides policy benefits directly to the insured or beneficiary in the event of a loss. The Texas Insurance Code, Section 541.051(2) defines “first party claim” as a claim “by an insured or policyholder under an insurance policy or contract or by a beneficiary named in the policy or contract that must be paid by insurer directly to the insured or beneficiary. These types of policies generally include health insurance, life insurance, disability insurance, auto policy insurance, homeowner’s property insurance, and commercial property insurance.
In contrast, “third party coverage” is generally considered to include all forms of liability insurance. This type of insurance is designed to insure against loss to third parties caused by the insured or another covered person for whom the covered person may be legally responsible.
Here are some types of “first party” policy examples:
Auto Property Coverage – The standard Texas Auto Policy covers accidental loss or damage to the covered auto. If an insured is involved in a single-car accident resulting in property damage to the insured vehicle, the insured possessing this type of coverage may submit a claim directly to their insurer and receive compensation for the damage to their vehicle in accordance with the terms of the Texas Auto Policy.
Health Insurance – Health insurance refers to coverage for medical and hospital expenses and may be issued on an individual or group basis. An insured who requires health care due to an illness or injury may submit a claim directly to their own insurer for the reasonable and necessary costs of the health care received. If the insured has paid for their health care, the insurer will reimburse the insured. If is also common practice for the health care provider to take an assignment of the insured’s interest in insurance benefits enabling the insurer to pay the care provider directly.
Life Insurance – Life insurance includes insurance on the life of the insured as well as annuities. Following the insured’s death, the life insurer pays death benefits in accordance with the policy to the designated beneficiary or beneficiaries.
Disability Insurance – The insurance industry uses the term “disability insurance” to refer to insurance against loss of income to an insured by reason of disability caused by accident or sickness. Disability insurance may be written on a group or individual basis. Disability policies may be noncancellable or guaranteed renewable. Disability benefits under some policies may be integrated by social security or unemployment benefits.