Also known as: First party coverage · Third party coverage
First-party coverage pays for your own losses; third-party coverage pays for claims others make against you.
The first-party versus third-party distinction describes who the coverage protects. First-party coverage pays for your own business's losses, for example your property damage, your lost income after a shutdown, or your own costs after a cyber incident. Third-party coverage pays when someone else brings a claim against you, for example a customer who sues over an injury, a data breach that harms clients, or a professional error that costs a client money. Many policies contain both: a cyber policy, for instance, covers your own breach-response costs (first party) and lawsuits from affected customers (third party). Knowing which side a coverage sits on tells you what it will and will not pay.
First-party insurance pays for your own business’s losses, such as property damage, lost income, or your own cyber-incident costs. Third-party insurance pays when someone else makes a claim against you, such as a customer lawsuit or a professional error that costs a client money.
Both. A typical cyber policy covers first-party costs (forensics, notification, business interruption, and restoring your own data) and third-party costs (defending and settling claims from customers or partners harmed by a breach). That combination is a big part of why cyber coverage matters.
Definitions are educational and may be modified by your specific policy language, endorsements, and state rules. For regulatory guidance, refer to the California Department of Insurance or the NAIC.
Last updated: July 2026.