Insurance policies may be complicated, and knowing what kinds of coverages are included is essential—particularly when you must make a claim. A key but lesser-known aspect is first-party insurance. This form of coverage benefits the policyholder directly, with financial support offered when unforeseen damages or losses happen, independent of fault.
In this article, you’ll find out what first-party insurance is, how it’s different from third-party insurance, what policies it covers, and when you need it the most. If you’re covering your car, house, or business, learning about first-party insurance can assure you that you’re well-protected when you need it most.
What Is First-Party Insurance?
First-party insurance is coverage that protects the policyholder against direct losses or damages. When you purchase a policy and make a claim for damage to your own property or for your own injuries, you are seeking first-party benefits. This type of insurance contract exists between you (the policyholder) and the insurance company.
It contrasts with third-party insurance, which covers liabilities to others—such as when you are at fault for damaging someone else’s property or causing them injury.
Key Characteristics of First-Party Insurance
- Direct protection for the insured: You are compensated for your own losses, not someone else’s.
- Contractual relationship: The insurer’s obligation to pay is based solely on your policy terms.
- No need to prove someone else was at fault: Coverage is triggered by your loss, not liability.
Common Types of First-Party Insurance Coverage
Several familiar policies fall under the umbrella of first-party insurance. Let’s explore some of the most common examples:
1. Auto Insurance – Collision and Comprehensive Coverage
If your car is damaged in a crash, stolen, or vandalized, collision and comprehensive coverages protect your vehicle.
- Collision coverage pays for damage to your car resulting from a crash, regardless of fault.
- Comprehensive coverage covers non-collision events like theft, natural disasters, or falling objects.
In both cases, the policyholder files a claim with their own insurer and receives payment—minus any deductible.
2. Homeowners or Renters Insurance
First-party coverage in homeowners or renters policies pays for:
- Damage to your dwelling or property
- Personal belongings lost due to fire, theft, or storm
- Temporary living expenses if your home becomes uninhabitable due to a covered event
These claims involve your property and are filed with your insurer, not with a third party.
3. Medical Payments Coverage (MedPay)
MedPay is a type of auto insurance that pays for your medical expenses and those of your passengers, regardless of who caused the accident. It is a first-party benefit that helps cover emergency room visits, surgeries, or rehabilitation.
4. Personal Injury Protection (PIP)
Personal Injury Protection is similar to MedPay but broader. It may cover:
- Medical expenses
- Lost wages
- Funeral costs
- Essential services like child care
PIP is required in some no-fault insurance states and functions as a first-party claim.
5. Business Interruption Insurance
Businesses often carry first-party insurance to cover financial losses from disruptions like fires or natural disasters. Business interruption insurance helps cover:
- Lost income
- Operating expenses
- Relocation costs
It ensures the business can stay afloat during unforeseen disruptions.
6. Health Insurance
When you visit a doctor or receive treatment, you’re invoking a first-party relationship with your health insurer. Claims for surgeries, prescriptions, and preventative care all fall under this coverage type.
First-Party vs. Third-Party Insurance: What’s the Difference?
Understanding the difference between these two types of coverage is critical:
Feature | First-Party Insurance | Third-Party Insurance |
Who is covered? | You (the policyholder) | Someone else who suffers from your actions |
Who files the claim? | You | Someone else files the claim against you |
Examples | Collision, PIP, Property Insurance | Liability for car accidents, general liability |
Triggered by | Your own loss | Your fault or legal liability |
Some policies—like full auto coverage—combine both first-party and third-party protection.
Why First-Party Insurance Matters
Many people assume insurance is only for situations where someone else is at fault. But many of the most common damages and losses don’t involve another party. That’s where first-party coverage becomes essential. Here’s why it matters:
- Covers you even if no one else is to blame
- Faster claims process, since you don’t need to pursue another party
- Essential for events like theft, fire, or natural disasters
- Helps avoid disputes over liability
Without first-party insurance, you may have no financial protection if a storm destroys your home, your car is vandalized, or you’re injured in a no-fault accident.
Common First-Party Claim Issues
Even though you’re dealing with your own insurer, first-party claims are not always straightforward. Some challenges include:
Claim Denials
Insurers may deny your claim if they believe the damage isn’t covered under your policy or suspect fraud. Always read your policy carefully and provide thorough documentation.
Delays in Payment
Some insurance companies delay payments by requesting excessive documentation or dragging out investigations.
Lowball Settlements
Insurers may undervalue your losses and offer less than what you need to repair or replace damaged property.
If you experience these problems, it may be necessary to hire an insurance attorney to fight for your rights under the implied covenant of good faith and fair dealing, which requires insurers to act fairly and promptly.
How to Strengthen a First-Party Insurance Claim
To improve your chances of a smooth claims process:
- Understand your policy: Know what’s covered, the limits, and your deductibles.
- Document everything: Take photos, keep receipts, and maintain a detailed record of events.
- Report the incident promptly: Notify your insurer as soon as the damage or loss occurs.
- Cooperate fully: Provide the requested information and assist in any investigations.
- Get estimates: Independent estimates for repairs or replacements can help justify your claim.
When to Hire a Lawyer
You may need legal help for a first-party insurance claim if:
- Your claim is unfairly denied
- You’re offered far less than your losses
- Your insurer is acting in bad faith
- You’re overwhelmed by the process or unsure of your rights
An attorney can review your policy, negotiate with the insurer, and file a lawsuit if needed.
About the Author
Neil Bhartia
Neil Bhartia isn’t your typical, stuffy attorney that you see on TV. While some have their sights exclusively on money and treat their clients like a number, Neil takes a personal interest in every single client he has. As an empath, Neil understands that people that seek legal help are typically in an involuntary, and stressful situation, and he goes out of his way to diffuse the stress and educate clients on each every detail of the legal process.
