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Insurance Policies and Insurance Parties

If you’re new to world of insurance you may hear the term first party, second party and third party. When you think of insurance, the last thing you think of is a party. After all, insurance means serious business, right? Read also: Do I need a Lawyer For Workers Compensation Claims.

How to Easily Understand Your Insurance Contract

In true insurance style, a party is not the festive occasion that the word party conjures up. When you purchase an insurance policy, you’re creating a party environment. Not the type of party that you would throw for a person’s retirement, but a type of party that is contract between two entities (called parties).

Insurance and the First Party (Sends the Invitation)

The first party in an insurance contract is you, the insured. She was the person who needs the insurance coverage whether it’s to cover a home, a car or an engagement ring. You initiate the party atmosphere (or send the party invite) because you need to insure something. Read also: The Five Most Important Considerations When Buying Life Insurance.

Insurance: Second Party (Accepting the Invite)

The insurance company becomes the second party. In an insurance contract you need at least two parties; the insured (the person or entity that needs insurance) and the second party (the entity that provides the insurance). Therefore, you send the invite to the insurance company in the form of an application and underwriting information and the insurance company looks it over. If they like what they see, then they’ll accept your invite and offer to provide a place for your party (the insurance policy).

The insurance company’s acceptance isn’t cheap. You have to pay for the policy.  Think of it as renting the party hall.

Insurance: Third Party (The Uninvited Guest)

Now that you and the insurance company are enjoying the party, here comes the party crasher; an uninvited guest. This guest shows up in the form of tripping and falling on your property or, you accidentally ram into the back of the Insurance Party uninvited guest’s car.  In other words, the third party is a person or entity that will file a liability claim against you. They believe you are liable for their injury or property damage.

Here’s where the party gets interesting. You notify the insurance company and they investigate the claim and pay in accordance to the terms and conditions of your insurance policy. The party crasher files what is known as a “third-party” claim. Read also: A Step-By-Step Guide for Buying Life Insurance.

First Party Claim

We’ve talked about third-party claims, but there are also times when you (the invitee) benefit from your own insurance company. This is in the form of first-party claims. Any claim whereby the insurance company has to reimburse you, the insured, is a first party claim. When things like your house burns down or suffers a water damage loss, your insurance company will pay you to repair or replace the damage.

Additionally, in the incident above where you rammed into the uninvited third-party guest with your brand new car, your insurance company not only pays the third party for your liability, but they will pay you too. They will give you money to repair your own car. In this case, the insurance company is probably wishing that they did not accept your party invitation.

In Summary:

  • First Party: The insured
  • Second Party: The insurance company
  • Third Party: Anyone who is not a first or second party (there are a lot of party crashers out there)


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