Subrogation is a concept that's well-known among insurance and legal professionals but often not by the customers they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it is in your self-interest to comprehend the nuances of the process. The more you know about it, the better decisions you can make with regard to your insurance company.
An insurance policy you own is a commitment that, if something bad occurs, the firm that covers the policy will make good in one way or another in a timely manner. If a hailstorm damages your house, for instance, your property insurance agrees to pay you or facilitate the repairs, subject to state property damage laws.
But since ascertaining who is financially responsible for services or repairs is usually a heavily involved affair – and time spent waiting in some cases increases the damage to the policyholder – insurance firms in many cases decide to pay up front and assign blame later. They then need a mechanism to get back the costs if, in the end, they weren't in charge of the payout.
Let's Look at an Example
Your garage catches fire and causes $10,000 in house damages. Luckily, you have property insurance and it pays for the repairs. However, the assessor assigned to your case discovers that an electrician had installed some faulty wiring, and there is a decent chance that a judge would find him to blame for the damages. You already have your money, but your insurance firm is out all that money. What does the firm do next?
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. Normally, only you can sue for damages to your person or property. But under subrogation law, your insurer is extended 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 Individuals?
For a start, 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 – namely, $1,000. If your insurance company is timid on any subrogation case it might not win, it might opt to recoup its costs by upping your premiums. On the other hand, if it knows which cases it is owed and pursues them efficiently, it is doing you a favor as well as itself. If all is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found 50 percent at fault), 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 may have had to pay the difference. If your insurance company or its property damage lawyers, such as workmen's compensation Columbus, ga, successfully press a subrogation case, it will recover your expenses in addition to its own.
All insurance agencies are not the same. When comparing, it's worth researching the records of competing agencies to find out if they pursue valid subrogation claims; if they do so with some expediency; if they keep their policyholders informed 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, instead, an insurer has a reputation of honoring claims that aren't its responsibility and then covering its bottom line by raising your premiums, even attractive rates won't outweigh the eventual headache.