Subrogation and How It Affects Policyholders

Subrogation is a term that's understood in legal and insurance circles but rarely by the customers they represent. Even if it sounds complicated, it is in your self-interest to comprehend an overview of the process. The more knowledgeable you are about it, the more likely relevant proceedings will work out favorably.

An insurance policy you own is an assurance that, if something bad occurs, the firm that covers the policy will make restitutions in one way or another in a timely manner. If a windstorm damages your home, for instance, your property insurance agrees to repay you or pay for the repairs, subject to state property damage laws.

But since figuring out who is financially responsible for services or repairs is usually a confusing affair – and delay often adds to the damage to the policyholder – insurance companies in many cases opt to pay up front and assign blame after the fact. They then need a mechanism to recoup the costs if, in the end, they weren't in charge of the expense.

Let's Look at an Example

You are in an auto accident. Another car crashed into yours. The police show up to assess the situation, you exchange insurance information, and you go on your way. You have comprehensive insurance that pays for the repairs right away. Later police tell the insurance companies that the other driver was entirely at fault and her insurance should have paid for the repair of your car. How does your insurance company get its money back?

How Does Subrogation Work?

This is where subrogation comes in. It is the process that an insurance company uses to claim reimbursement when it pays out a claim that turned out not to be its responsibility. Some companies have in-house property damage lawyers and personal injury attorneys, or a department dedicated to subrogation; others contract with a law firm. Normally, only you can sue for damages done to your person or property. But under subrogation law, your insurance company is given some of your rights for making good on the damages. It can go after the money originally due to you, because it has covered the amount already.

Why Should I Care?

For one thing, if you have a deductible, it wasn't just your insurance company who had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – to the tune of $1,000. If your insurance company is unconcerned with pursuing subrogation even when it is entitled, it might choose to get back its expenses by raising your premiums. On the other hand, if it has a knowledgeable legal team and pursues those cases enthusiastically, it is acting both in its own interests and in yours. If all ten grand is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found one-half to blame), you'll typically get $500 back, based on the laws in most states.

Furthermore, if the total price of an accident is over your maximum coverage amount, you may have had to pay the difference. If your insurance company or its property damage lawyers, such as workmans comp attorney Canton, ga, pursue subrogation and wins, it will recover your costs as well as its own.

All insurance agencies are not created equal. When shopping around, it's worth looking up the records of competing firms to determine if they pursue valid subrogation claims; if they do so without delay; if they keep their policyholders advised as the case goes on; and if they then process successfully won reimbursements immediately so that you can get your funding back and move on with your life. If, on the other hand, an insurance firm has a reputation of honoring claims that aren't its responsibility and then safeguarding its income by raising your premiums, even attractive rates won't outweigh the eventual headache.