Subrogation is an idea that's understood in insurance and legal circles but often not by the people they represent. Even if you've never heard the word before, it would be to your advantage to comprehend the nuances of the process. The more you know about it, the better decisions you can make about your insurance company.
An insurance policy you have is a commitment that, if something bad happens to you, the business on the other end of the policy will make restitutions in a timely manner. If a storm damages your property, for instance, your property insurance steps in to pay you or facilitate the repairs, subject to state property damage laws.
But since figuring out who is financially responsible for services or repairs is typically a time-consuming affair a€" and delay sometimes adds to the damage to the policyholder a€" insurance companies often decide to pay up front and assign blame later. They then need a method to regain the costs if, when there is time to look at all the facts, they weren't in charge of the payout.
Can You Give an 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 that pays for the repairs right away. Later it's determined that the other driver was at fault and his insurance should have paid for the repair of your car. How does your company get its money back?
How Subrogation Works
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. Ordinarily, only you can sue for damages to your person or property. But under subrogation law, your insurer is given some of your rights 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 the Insured?
For one thing, if you have a deductible, your insurer wasn't the only one that had to pay. In a $10,000 accident with a $1,000 deductible, you have a stake in the outcome as well a€" to the tune of $1,000. If your insurer is lax about bringing subrogation cases to court, it might choose to get back its costs by boosting your premiums. On the other hand, if it has a knowledgeable legal team and pursues those cases aggressively, it is doing you a favor as well as itself. If all of the money is recovered, you will get your full $1,000 deductible back. If it recovers half (for instance, in a case where you are found one-half at fault), you'll typically get $500 back, depending on your state laws.
Furthermore, if the total expense of an accident is over your maximum coverage amount, you may have had to pay the difference, which can be extremely spendy. If your insurance company or its property damage lawyers, such as worker compensation terms Duluth GA, pursue subrogation and wins, it will recover your expenses as well as its own.
All insurance agencies are not the same. When comparing, it's worth comparing the reputations of competing agencies to determine if they pursue valid subrogation claims; if they do so fast; if they keep their policyholders advised as the case continues; 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 insurance firm has a reputation of honoring claims that aren't its responsibility and then protecting its income by raising your premiums, you should keep looking.