Subrogation is an idea that's understood in insurance and legal circles but rarely by the policyholders they represent. Rather than leave it to the professionals, it is in your self-interest to understand an overview of the process. The more knowledgeable you are about it, the better decisions you can make about your insurance policy.
An insurance policy you own is an assurance that, if something bad happens to you, the business that insures the policy will make restitutions in a timely manner. If your home suffers fire damage, your property insurance agrees to repay you or enable the repairs, subject to state property damage laws.
But since ascertaining who is financially accountable for services or repairs is sometimes a tedious, lengthy affair – and time spent waiting often increases the damage to the victim – insurance companies often opt to pay up front and assign blame later. They then need a mechanism to get back the costs if, once the situation is fully assessed, 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 details, and you go on your way. You have comprehensive insurance that pays for the repairs right away. Later it's determined that the other driver was to blame and his insurance policy should have paid for the repair of your auto. How does your insurance company get its money back?
How Subrogation Works
This is where subrogation comes in. It is the method 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. Usually, only you can sue for damages to your self or property. But under subrogation law, your insurance company is given some of your rights for having taken care of the damages. It can go after the money originally due to you, because it has covered the amount already.
How Does This Affect Policyholders?
For starters, if you have a deductible, your insurance company wasn't the only one who had to pay. In a $10,000 accident with a $1,000 deductible, you have a stake in the outcome as well – namely, $1,000. If your insurer is timid on any subrogation case it might not win, it might choose to recoup its costs by raising your premiums and call it a day. On the other hand, if it has a proficient legal team and pursues those cases aggressively, it is doing you a favor as well as itself. If all $10,000 is recovered, you will get your full thousand-dollar deductible back. If it recovers half (for instance, in a case where you are found one-half accountable), you'll typically get half your deductible back, based on the laws in most states.
In addition, if the total expense of an accident is over your maximum coverage amount, you could be in for a stiff bill. If your insurance company or its property damage lawyers, such as Norcross personal injury lawyer, successfully press a subrogation case, it will recover your losses as well as its own.
All insurance agencies are not created equal. When comparing, it's worth scrutinizing the records of competing companies to determine whether they pursue winnable subrogation claims; if they do so without delay; if they keep their policyholders updated as the case proceeds; and if they then process successfully won reimbursements right away so that you can get your deductible back and move on with your life. If, instead, an insurer has a record of honoring claims that aren't its responsibility and then safeguarding its profitability by raising your premiums, even attractive rates won't outweigh the eventual headache.