Subrogation and How It Affects Your Insurance

Subrogation is a term that's well-known in insurance and legal circles but rarely by the people they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it would be to your advantage to understand an overview of the process. The more knowledgeable you are about it, the more likely it is that relevant proceedings will work out in your favor.

Every insurance policy you own is a promise that, if something bad happens to you, the firm on the other end of the policy will make good without unreasonable delay. If a windstorm damages your home, your property insurance steps in to compensate you or pay for the repairs, subject to state property damage laws.

But since ascertaining who is financially accountable for services or repairs is often a heavily involved affair – and time spent waiting sometimes compounds the damage to the policyholder – insurance companies usually decide to pay up front and assign blame later. They then need a mechanism to recover the costs if, ultimately, they weren't in charge of the expense.

For Example

You are in an auto accident. Another car collided with yours. The police show up to assess the situation, you exchange insurance information, and you go on your way. You have comprehensive insurance and file a repair claim. Later it's determined that the other driver was entirely to blame and her insurance policy should have paid for the repair of your vehicle. How does your insurance 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 after it has paid for something that should have been paid by some other entity. Some insurance firms 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 considered to have 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.

Why Should I Care?

For starters, 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 – to be precise, $1,000. If your insurer is lax about bringing subrogation cases to court, it might opt to recoup its expenses by boosting your premiums. On the other hand, if it has a knowledgeable legal team and goes after those cases efficiently, 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 responsible), you'll typically get half your deductible back, depending on the laws in your state.

In addition, if the total cost of an accident is more than 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 attorneys that specialize in auto accidents Powder Springs GA, successfully press a subrogation case, it will recover your losses as well as its own.

All insurance agencies are not the same. When comparing, it's worth researching the records of competing firms to evaluate whether they pursue winnable subrogation claims; if they resolve those claims with some expediency; 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 money back and move on with your life. If, instead, an insurer has a record of paying out claims that aren't its responsibility and then protecting its bottom line by raising your premiums, you'll feel the sting later.

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