Which term is commonly used to describe liability losses in insurance?

Liability losses in insurance are commonly referred to as third party losses. This terminology arises from the basic structure of liability insurance, where the insured party (the first party) faces a claim from another individual or entity (the third party) for damages or injuries. The insurance policy protects the insured from the financial consequences of those claims, thereby compensating the third party for their loss.

In contrast, first party losses refer to losses suffered directly by the insured themselves, such as damage to their own property. Direct losses indicate a more immediate impact, typically referring to losses that occur as a direct result of a specific incident, which doesn't encapsulate the broader scenario of liability claims. Aggregate losses are a term that relates to total losses accumulated over a period or from multiple events, and while relevant in a different context, they do not specifically define the nature of liability losses. Thus, third party losses accurately characterizes the essence of liability insurance, where the focus is on claims made against the insured by others.