The Things Every Policy holder Ought to Know About Subrogation

Subrogation is a concept that's well-known among insurance and legal firms but often not by the policyholders they represent. Rather than leave it to the professionals, it is in your benefit to understand 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 own is a promise that, if something bad happens to you, the company on the other end of the policy will make restitutions without unreasonable delay. If your home suffers fire damage, your property insurance steps in to repay you or pay for the repairs, subject to state property damage laws.

But since determining who is financially accountable for services or repairs is sometimes a confusing affair – and delay sometimes adds to the damage to the victim – insurance firms usually decide to pay up front and assign blame afterward. They then need a method to regain the costs if, once the situation is fully assessed, they weren't in charge of the expense.

For Example

Your electric outlet catches fire and causes $10,000 in home damages. Luckily, you have property insurance and it pays for the repairs. However, in its investigation it discovers that an electrician had installed some faulty wiring, and there is a reasonable possibility that a judge would find him responsible for the loss. You already have your money, but your insurance firm is out $10,000. What does the firm do next?

How Subrogation Works

This is where subrogation comes in. It is the method that an insurance company uses to claim payment 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 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 Policyholders?

For starters, 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 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 choose to recoup its expenses by boosting your premiums and call it a day. On the other hand, if it knows which cases it is owed and goes after those cases enthusiastically, it is doing you a favor as well as itself. If all of the money is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found one-half culpable), you'll typically get half your deductible back, based on the laws in most states.

Moreover, if the total cost 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 car accident attorney Duluth ga, pursue subrogation and wins, it will recover your costs as well as its own.

All insurance companies are not the same. When shopping around, it's worth researching the records of competing firms to determine if they pursue winnable subrogation claims; if they resolve those claims without delay; if they keep their customers apprised as the case goes on; and if they then process successfully won reimbursements immediately so that you can get your funding back and move on with your life. If, instead, an insurance agency has a reputation of honoring claims that aren't its responsibility and then protecting its income by raising your premiums, you should keep looking.