When investigating a potential insurance claim or lawsuit, it is important to be aware of differences between first party and third party insurance. Knowledge of applicable insurance claims helps to expedite the legal process. Generally speaking, first party insurance is purchased by individuals to cover themselves and their personal property. Third party insurance is purchased by individuals to protect themselves from expenses or lawsuits brought by other individuals. In any instance, the “first party” is the insurance purchaser, the “second party” is the insurance company, and the “third party” is another individual or entity.

Third Party Insurance

Third party insurance is in place to protect policy holders against potential financial or legal claims against them from another individual. This other individual is referred to as the “third party.” These claims and lawsuits typically result from the actions of the insured.

Third Party Auto Insurance

Auto liability insurance is a common example of third party insurance. In the event that the insured individual causes personal or vehicle damage to a third party, third party insurance can help to cover costs. Third party insurance claims may include expenses for the other individual’s medical bills and property repairs.

First Party Insurance

First party insurance is purchased to protect individuals and their property. Common examples of first party insurance include renter’s insurance or homeowner’s insurance. First party auto insurance covers injuries or property damage to the purchaser, as opposed to coverage for other individuals provided by third party insurance.

First Party Litigation

First party litigation may occur when there is a dispute between the insurance company and the policy purchaser. Insurance bad faith is a term used to describe unethical or unfair practices of an insurance company. Insurance companies owe a duty to customers to act in good faith and fair dealing. When insurance companies fail to do so, the policy holder may be able to file a lawsuit for their bad faith conduct. Individuals who believe that their insurance company has acted in bad faith should consult an experienced first party litigation attorney to discuss case eligibility and options.

Insurance Law Considerations

The type of insurance policies an individual has may depend on the laws of the state where the individual lives. For example, auto insurance requirements vary from state to state. Some states require first party auto insurance to cover drivers in the event that they experience injury or property damage while driving. Some states require third party auto insurance in the event that drivers cause injury or property damage to other drivers. Some states require both types of insurance.

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