Subrogation and How It Affects Policyholders

Subrogation is a term that's well-known in legal and insurance circles but sometimes not by the policyholders they represent. Even if it sounds complicated, it would be in your self-interest to understand the nuances of the process. The more information you have about it, the more likely relevant proceedings will work out favorably.

Every insurance policy you own is an assurance that, if something bad occurs, the insurer of the policy will make good in one way or another without unreasonable delay. If a hailstorm damages your home, your property insurance agrees to repay you or facilitate the repairs, subject to state property damage laws.

But since figuring out who is financially responsible for services or repairs is regularly a confusing affair – and time spent waiting in some cases increases the damage to the victim – insurance firms in many cases decide to pay up front and assign blame afterward. They then need a path to regain the costs if, once the situation is fully assessed, they weren't in charge of the payout.

Let's Look at an Example

You are in a car accident. Another car crashed into yours. The police show up to assess the situation, you exchange insurance details, and you go on your way. You have comprehensive insurance that pays for the repairs right away. Later police tell the insurance companies that the other driver was at fault and her insurance should have paid for the repair of your auto. How does your insurance company get its funds back?

How Does Subrogation Work?

This is where subrogation comes in. It is the way 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 self 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 that was originally due to you, because it has covered the amount already.

Why Should I Care?

For one thing, if your insurance policy stipulated a deductible, your insurer 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 insurer is lax about bringing subrogation cases to court, it might opt to recoup its costs by raising your premiums and call it a day. On the other hand, if it knows which cases it is owed and goes after them enthusiastically, it is doing you a favor as well as itself. If all $10,000 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 loss of an accident is over 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 probate attorney paddock lake wi, successfully press a subrogation case, it will recover your losses in addition to its own.

All insurance companies are not created equal. When comparing, it's worth researching the records of competing companies to determine whether they pursue winnable subrogation claims; if they resolve those claims without dragging their feet; if they keep their policyholders advised as the case proceeds; and if they then process successfully won reimbursements quickly so that you can get your deductible back and move on with your life. If, on the other hand, an insurer has a record of paying out claims that aren't its responsibility and then protecting its profit margin by raising your premiums, you'll feel the sting later.

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