First Party Insurance vs Third Party Insurance

First party insurance refers to coverage that pays benefits directly to you (the policyholder) regardless of who caused the accident. You might also hear these called “no-fault” benefits because they apply whether you were at fault or not.

When you file a claim with your own insurance company after an accident, that’s a first party insurance claim. Your insurer already has your information on file, knows your coverage limits, and has a contractual obligation to handle your claim promptly.

Third party insurance protects you when you’re liable for damages to another person or their property. When someone else causes an accident and you file a claim against their insurance company, you’re making a third party claim.

Here’s the flip side: if another driver believes you caused the accident and files a claim against your liability coverage, they’re making a third party claim against you. In that situation, we recommend contacting an experienced auto collision attorney.

At OlsenDaines, we help Oregon and Washington residents navigate insurance claims and accident recovery every day. Our personal injury attorneys have extensive experience dealing with insurance companies.

Examples of Third Party vs First Party Insurance

First Party Coverage

• Personal injury protection (PIP)
• Uninsured/underinsured motorist coverage (UM/UIM)
• Medical payment coverage
• Collision coverage

Third Party Insurance

• Auto liability insurance
• Homeowner’s insurance for injuries to visitors
• Commercial liability insurance

Key Differences in How Each Works

Other Differences You Should Know About Claims

First party claims come with deductibles. If your policy has a $1,000 deductible, you’ll pay that amount before your insurance covers the rest. Filing a claim might also increase your premiums at renewal.

But when your car is totaled and you need transportation for work, waiting months for a third party insurer to accept liability isn’t practical. Filing with your own insurer gets you compensation faster.

Third party claims don’t involve deductibles and won’t affect your insurance rates. However, you’re dealing with an insurer that has every incentive to pay you as little as possible. Proving liability falls entirely on you: you’ll need police reports, witness statements, photos, and medical records.

When You Might File Both First Party and Third Party Claims

Sometimes the best strategy involves filing both types of claims for the same accident. Consider this scenario:

Another driver caused the collision, but they only carry minimum liability coverage of $25,000. Your medical bills alone total $50,000.

Here’s how you’d maximize your recovery:

1. File a third party claim against their insurance for their policy limits ($25,000).
2. File a first party claim under your underinsured motorist coverage to cover the remaining $25,000.

Your insurance company will pay you under your UM/UIM policy, then pursue reimbursement from the at-fault driver through a process called subrogation. You get paid faster, and your insurer handles the hassle of recovering from the other driver.

Bad Faith: A Critical First Party Distinction

If your own insurance company unreasonably denies your valid claim, delays payment without justification, or fails to properly investigate, you may be able to sue them for acting in bad faith. This legal protection exists because your insurer has a contractual duty to treat you fairly.

Bad faith claims typically only apply to first party insurance relationships.

Third party insurers don’t owe you the same duty. They represent their policyholder’s interests, not yours. While they can’t commit outright fraud, they have much more latitude to deny claims or offer low settlements without facing bad faith liability.

This is why dealing with your own insurer (even when it means using your own coverage) often provides better leverage and accountability.

Oregon & Washington Insurance Requirements

In both states, drivers are required to carry valid auto insurance. Your policy must include coverage for:

• Bodily injury liability (BI)
• Property damage liability
• Personal injury protection (PIP)
• Uninsured/underinsured motorist coverage (UM/UIM)

Minimum liability and UM/UIM coverage must be at least $25,000 per person/$50,000 per accident, and PIP insurance must be at least $15,000. These amounts are mandated by the Financial Responsibility Law.

Important note for Washington state drivers: Washington allows you to elect not to purchase PIP coverage. However, if you don’t have PIP and lack health insurance, you’ll need to pay for medical treatment upfront and find a provider willing to accept payments while your personal injury case resolves.

How Does PIP Coverage Work?

PIP is a first party benefit. In the event of an accident, it pays for your medical expenses regardless of fault (up to one year or $15,000, whichever comes first). You can increase your PIP coverage by paying for more than the minimum.

Oregon’s minimum PIP coverage pays for more than just medical bills:

• Loss of income: Replaces wages you couldn’t earn due to injuries.
• Household services: Covers help for tasks you can no longer perform at home.
• Funeral benefits: Provides coverage in the event of a fatal accident.

What Is No-Fault Insurance?

No-fault insurance means that, regardless of who caused the accident, each driver’s insurer pays their own policyholder’s medical expenses, lost wages, and other costs.

Here’s an important distinction for Oregon and Washington residents: Even though you’re required to carry no-fault insurance, neither Oregon nor Washington are “no-fault states.”

What does this mean practically? Unlike true no-fault states, you retain your right to sue the at-fault driver to recover the cost of your medical expenses, lost income, and pain and suffering. This gives you more options for full compensation than drivers in pure no-fault states.

Experienced Accident Attorneys in Oregon and Washington

Review your existing auto insurance policy so you know what’s included. Understand your limits and what’s covered versus what isn’t. This knowledge becomes invaluable the moment you need to file a claim.

If you have questions about first party vs third party insurance coverage, or you’ve been in an accident and aren’t sure what to do next, the attorneys at OlsenDaines are here to help.

Have questions or want to schedule a free consultation? Give us a call today.