The Things Every Insurance Policy holder Ought to Know About Subrogation

Subrogation is a term that's well-known in insurance and legal circles but often not by the customers who employ them. Rather than leave it to the professionals, it would be in your benefit to comprehend the nuances of how it works. The more you know about it, the better decisions you can make with regard to your insurance company.

An insurance policy you have is an assurance that, if something bad occurs, the insurer of the policy will make good in a timely manner. If your vehicle is rear-ended, insurance adjusters (and the courts, when necessary) determine who was at fault and that person's insurance covers the damages.

But since determining who is financially responsible for services or repairs is typically a time-consuming affair – and time spent waiting often compounds the damage to the victim – insurance companies usually opt to pay up front and assign blame afterward. They then need a mechanism to recover the costs if, when all is said and done, they weren't responsible for the expense.

For Example

You go to the emergency room with a gouged finger. You give the receptionist your medical insurance card and she takes down your coverage details. You get stitches and your insurance company gets a bill for the services. But on the following morning, when you arrive at your workplace – where the injury happened – you are given workers compensation forms to fill out. Your workers comp policy is actually responsible for the bill, not your medical insurance company. The latter has a right to recover its costs somehow.

How Does Subrogation Work?

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. Normally, only you can sue for damages to your person or property. But under subrogation law, your insurance company is extended 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.

How Does This Affect Individuals?

For one thing, if your insurance policy stipulated 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 insurance company is lax about bringing subrogation cases to court, it might choose to get back its costs by boosting your premiums and call it a day. On the other hand, if it has a competent legal team and goes after them aggressively, 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.

In addition, if the total loss 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 workers compensation Whitewater, WI, successfully press a subrogation case, it will recover your expenses in addition to its own.

All insurance agencies are not created equal. When shopping around, it's worth examining the reputations of competing agencies to determine if they pursue legitimate subrogation claims; if they do so fast; if they keep their policyholders posted as the case goes on; and if they then process successfully won reimbursements immediately so that you can get your money 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, even attractive rates won't outweigh the eventual headache.