Your Insurance or Theirs? First-Party vs. Third-Party Claims

General information, not legal advice. Insurance policies and state laws differ. Check your own policy, and for a legal question ask a licensed attorney or your state insurance department.

A first-party claim is one you make under your own policy, usually your collision or comprehensive coverage. A third-party claim is one you make against the at-fault driver's liability insurance. With a first-party claim you pay your deductible, but you deal with a company you have a contract with. With a third-party claim there is no deductible, but the other company pays only if it accepts that its driver was at fault, and only up to that driver's limits. You can start with one and switch to the other if you need to.

What is a first-party claim?

You are the policyholder asking your own insurer to pay under your policy. For car damage, that means collision coverage (crashes) or comprehensive coverage (theft, hail, animals, vandalism and similar). Our guide on collision vs. comprehensive explains which one applies.

What to expect:

• You pay the deductible. The insurer subtracts it from the payment. See what a deductible is.
• Fault does not decide whether you are paid. New York's Department of Financial Services describes collision coverage as paying for damage to your car caused by a collision, regardless of fault.
• Your policy's terms apply. That includes any appraisal clause for disputes over the amount. The Texas Department of Insurance notes that appraisal can be used only with your own insurer, not another driver's.
• Your insurer may recover from the other side. If someone else caused the crash, your insurer can go after them and, under the NAIC model regulation, should include your deductible if you ask. That is subrogation.

What is a third-party claim?

You are asking the at-fault driver's insurer to pay for damage its customer caused. You have no contract with that company. Its duty runs to its own policyholder, and it pays because its policyholder is legally responsible to you. New York's Department of Financial Services describes liability coverage as paying for harm a driver causes to other people and their property.

What to expect:

• No deductible. You don't pay one on a claim against another driver's insurer.
• Fault comes first. The other insurer will investigate before it accepts liability. If it disputes fault, payment can stall.
• Limits matter. The other driver's property damage limit caps what that company pays. In New York the required minimum is $10,000 for damage to another party's car or property, according to the Department of Financial Services.
• Some losses are usually claimed this way. The Washington insurance commissioner says a diminished value claim, for the resale value a car loses after a crash, is typically filed against the at-fault driver's insurer, not your own. Whether you can recover it depends on your state's law. New York's Department of Financial Services does not address it in its claims guide, so ask an attorney before you count on it.

Which one should you choose?

There is no single right answer. These are the usual reasons people pick one or the other.

A third-party claim often makes sense when:

• the other driver clearly caused the crash and admits it, or the police report says so
• the other driver is insured and their company is responding
• you don't have collision coverage, or you want to avoid paying a deductible

A first-party claim often makes sense when:

• fault is disputed or the other insurer is slow. The Texas Department of Insurance says that if the other driver's company won't pay, you can file with your own company if you have collision coverage, and your company will probably try to collect from the other one
• the other driver has no insurance or too little. See uninsured and underinsured motorist coverage
• the at-fault driver is unknown, as in a hit and run

Can the other driver's insurer tell you to use your own coverage?

It can suggest it, but there are limits. Under the NAIC model regulation, when liability and damages are reasonably clear, an insurer should not recommend that a third-party claimant claim under their own policy just to avoid paying under its policy. States adopt this rule in their own way. If you are pushed toward your own coverage on a clear-fault crash, ask the other insurer to explain its position in writing.

Do your rights differ between the two kinds of claims?

Yes, in some states. Claim-handling rules usually protect both kinds of claimants, but not always in the same way.

• The NAIC model regulation defines "claimant" to include both first-party and third-party claimants.
• In New York, the Department of Financial Services says Regulation 64 sets the guidelines and time limits both for claims under your own collision and comprehensive coverage and for property damage liability claims you make against another driver. Some of the deadlines printed below apply only to collision and comprehensive claims.
• Texas works differently. The Texas Department of Insurance says the prompt payment deadlines don't apply when another driver's insurer is paying, though that company must still act in good faith and try to settle quickly and fairly.

What about no-fault states?

No-fault laws are mainly about injuries. According to the Insurance Information Institute, twelve states and Puerto Rico have no-fault auto insurance laws, which require drivers to carry personal injury protection (PIP) coverage and to file a claim with their own insurer after an accident, whoever was at fault. New York is one of them, and its no-fault rule, printed below, is about injuries. Damage to your car is claimed separately, under your own collision or comprehensive coverage or as a property damage liability claim against the other driver, the routes New York's Department of Financial Services describes for car damage. Our guide to PIP and medical payments covers the injury side.

Dos and don'ts for either kind of claim

Whichever insurer pays, the repair is the same job. Learn how collision repair works once the claim is approved.