Subrogation and How It Affects Policyholders

Subrogation is a concept that's well-known among insurance and legal companies but often not by the customers who employ them. Even if it sounds complicated, it would be in your self-interest to comprehend the steps of how it works. The more you know about it, the more likely it is that relevant proceedings will work out favorably.

Any insurance policy you own is a commitment that, if something bad happens to you, the insurer of the policy will make good without unreasonable delay. If a fire damages your real estate, for example, your property insurance steps in to remunerate you or enable the repairs, subject to state property damage laws.

But since figuring out who is financially responsible for services or repairs is typically a tedious, lengthy affair a€" and time spent waiting often adds to the damage to the policyholder a€" insurance firms usually opt to pay up front and figure out the blame after the fact. They then need a method to recover the costs if, in the end, they weren't in charge of the payout.

For Example

Your kitchen catches fire and causes $10,000 in home damages. Happily, you have property insurance and it takes care of the repair expenses. However, the insurance investigator finds out that an electrician had installed some faulty wiring, and there is reason to believe that a judge would find him to blame for the damages. You already have your money, but your insurance company is out $10,000. What does the company 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 insurance firms have in-house property damage lawyers and personal injury attorneys, or a department dedicated to subrogation; others contract with a law firm. Usually, only you can sue for damages done to your self or property. But under subrogation law, your insurer is extended some of your rights in exchange for having taken care of the damages. It can go after the money originally due to you, because it has covered the amount already.

Why Do I Need to Know This?

For one thing, 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 a€" to the tune of $1,000. If your insurer is unconcerned with pursuing subrogation even when it is entitled, it might opt to recoup its costs by boosting your premiums and call it a day. On the other hand, if it has a knowledgeable legal team and pursues them enthusiastically, it is doing you a favor as well as itself. If all $10,000 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 culpable), you'll typically get half your deductible back, depending on your state laws.

Additionally, if the total cost 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 worker compensation terms Canton GA, successfully press a subrogation case, it will recover your expenses in addition to its own.

All insurers are not created equal. When comparing, it's worth weighing the records of competing firms to evaluate whether they pursue legitimate subrogation claims; if they resolve those claims quickly; if they keep their accountholders posted as the case continues; 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 insurer has a reputation of honoring claims that aren't its responsibility and then safeguarding its bottom line by raising your premiums, you should keep looking.