Who is classified as a third party in insurance terms?

In insurance terminology, a third party is typically defined as any person or entity that is not directly involved in the insurance contract between the insured (the Assured) and the insurer. The correct choice identifies this concept accurately, indicating that a third party is anyone who is not the Assured and does not reside with them or is not related to them.

This classification is important in the context of various insurance policies, particularly liability insurance. For example, if an insured individual causes damage to someone else's property, that individual (the damaged party) is considered a third party. Understanding this classification is critical for assessing liability and coverage in various scenarios.

The other options provided describe individuals who have a closer connection to the Assured, such as the Assured themselves, their family or household members, and their employees. These categories do not fit the definition of a third party because they are either directly involved in the insurance contract or have personal or professional relationships with the Assured, which places them outside the boundaries of the third party classification.