Types of first-party insurance

Under a ‘third-party’ or ‘liability’ insurance policy one person (the ‘first party’ we might say) is insured by the insurer (the ‘second party’) against the risk of being held legally liable to another (the ‘third party’). Under a ‘first-party’ or ‘loss’ insurance policy the policy holder (the first party) is insured against the risk of suffering loss specified in the policy by causes defined therein. Nearly all accident risks can be covered by first-party insurance of one kind or another. Life insurance, which usually covers death from any cause except (in some cases) sane suicide, is by far the most common form of first-party insurance against risks to the person (i.e. death from personal injury and other causes). In 1996–7, 61% of UK households were paying for some life insurance. A significant proportion of life insurance is mortgage-related – that is, it provides security against the death of the mortgagor. Total UK premium income in 1997 for life insurance was about £28 billion. The popularity of life insurance is partly attributable to the fact that it is used as a form of investment, not merely as a protection against risks; but also partly to the fact that premiums for this type of insurance are low relative to the benefits provided.