Subrogation is a term that's understood in insurance and legal circles but sometimes not by the people who employ them. If this term has come up when dealing with your insurance agent or a legal proceeding, it would be to your advantage to know the nuances of how it works. The more knowledgeable you are about it, the better decisions you can make with regard to your insurance policy.
Any insurance policy you own is an assurance that, if something bad happens to you, the insurer of the policy will make good in a timely manner. If a fire damages your property, for example, your property insurance steps in to remunerate you or pay for the repairs, subject to state property damage laws.
But since determining who is financially responsible for services or repairs is often a confusing affair – and delay in some cases increases the damage to the policyholder – insurance firms usually decide to pay up front and assign blame later. They then need a way to regain the costs if, when all is said and done, they weren't in charge of the expense.
Let's Look at an Example
You are in a car accident. Another car collided with yours. The police show up to assess the situation, you exchange insurance information, 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 entirely at fault and her insurance should have paid for the repair of your car. How does your 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 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. Normally, only you can sue for damages to your person or property. But under subrogation law, your insurer is given some of your rights for making good on the damages. It can go after the money that was originally due to you, because it has covered the amount already.
Why Does This Matter to Me?
For a start, if your insurance policy stipulated a deductible, it wasn't just your insurer who 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 unconcerned with pursuing subrogation even when it is entitled, it might opt to get back its costs 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 aggressively, it is doing you a favor as well as itself. If all ten grand 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 to blame), you'll typically get half your deductible back, depending on your state laws.
Moreover, if the total expense 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 foreclosure lawyers Batesville AR, successfully press a subrogation case, it will recover your losses as well as its own.
All insurance companies are not the same. When comparing, it's worth measuring the records of competing firms to evaluate whether they pursue valid subrogation claims; if they resolve those claims without dragging their feet; if they keep their clients updated 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, on the other hand, an insurer 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.