What does first-party coverage protect?

First-party coverage is designed specifically to protect the insured's own interests in the event of loss or damage. This type of coverage directly addresses the financial impact that a loss can have on the policyholder, ensuring that they receive compensation for the costs associated with damage to their property or any claims for loss that they suffer.

For example, in an automobile insurance context, first-party coverage would cover expenses related to the insured's vehicle in the event of an accident, allowing for repairs or replacement without needing to involve other parties. This differentiates first-party coverage from other types of insurance, which may focus on the liabilities or interests of others involved in an incident rather than the individual insurance policyholder’s own losses.

Other choices pertain to interests that are not aligned with the primary purpose of first-party coverage, which is fundamentally about protecting the policyholder's own financial interests.