What Every Insurance Policy holder Ought to Know About Subrogation

Subrogation is an idea that's well-known among legal and insurance professionals but sometimes not by the policyholders who employ them. If this term has come up when dealing with your insurance agent or a legal proceeding, it would be to your advantage to understand the nuances of how it works. The more knowledgeable you are about it, the better decisions you can make about your insurance company.

Every insurance policy you own is an assurance that, if something bad happens to you, the insurer of the policy will make good in one way or another in a timely manner. If your vehicle is rear-ended, insurance adjusters (and the judicial system, when necessary) decide who was at fault and that party's insurance pays out.

But since figuring out who is financially responsible for services or repairs is sometimes a confusing affair – and time spent waiting sometimes compounds the damage to the policyholder – insurance companies usually decide to pay up front and assign blame after the fact. They then need a way to recover the costs if, when there is time to look at all the facts, they weren't actually responsible for the payout.

For Example

You are in a highway accident. Another car crashed into yours. Police are called, you exchange insurance details, and you go on your way. You have comprehensive insurance and file a repair claim. Later police tell the insurance companies that the other driver was at fault and his insurance policy should have paid for the repair of your car. How does your insurance company get its funds back?

How Subrogation Works

This is where subrogation comes in. It is the way 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. Under ordinary circumstances, only you can sue for damages done to your person or property. But under subrogation law, your insurer is given some of your rights in exchange for having taken care of the damages. It can go after the money that was originally due to you, because it has covered the amount already.

How Does This Affect Me?

For one thing, if your insurance policy stipulated a deductible, your insurer wasn't the only one that had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – to be precise, $1,000. If your insurer is timid on any subrogation case it might not win, it might opt to recover its costs by upping your premiums and call it a day. On the other hand, if it has a knowledgeable legal team and goes after those cases enthusiastically, it is doing you a favor as well as itself. If all ten grand is recovered, you will get your full thousand-dollar deductible back. If it recovers half (for instance, in a case where you are found 50 percent accountable), you'll typically get half your deductible back, depending on the laws in your state.

In addition, if the total expense of an accident is more than your maximum coverage amount, you could be in for a stiff bill. If your insurance company or its property damage lawyers, such as Personal injury attorney Lithia springs, pursue subrogation and wins, it will recover your costs as well as its own.

All insurers are not created equal. When comparing, it's worth comparing the records of competing agencies to find out if they pursue legitimate subrogation claims; if they resolve those claims quickly; if they keep their policyholders posted as the case proceeds; and if they then process successfully won reimbursements right away so that you can get your losses back and move on with your life. If, on the other hand, an insurance firm has a record of honoring claims that aren't its responsibility and then protecting its profitability by raising your premiums, you'll feel the sting later.