What Every Insurance Policy holder Ought to Know About Subrogation

Subrogation is a concept that's understood among insurance and legal companies but sometimes not by the people they represent. Rather than leave it to the professionals, it would be in your benefit to understand an overview of how it works. The more information you have about it, the better decisions you can make about your insurance policy.

An insurance policy you hold is a commitment that, if something bad happens to you, the firm on the other end of the policy will make restitutions in a timely manner. If a blizzard damages your house, your property insurance agrees to compensate you or enable 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 often increases the damage to the policyholder – insurance companies often decide to pay up front and assign blame after the fact. They then need a method to recover the costs if, ultimately, they weren't responsible for the payout.

For Example

Your stove catches fire and causes $10,000 in home damages. Happily, 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 to blame for the damages. You already have your money, but your insurance agency is out $10,000. What does the agency do next?

How Does Subrogation Work?

This is where subrogation comes in. It is the way that an insurance company uses to claim payment 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. Ordinarily, only you can sue for damages to your person or property. But under subrogation law, your insurance company is considered to have 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 Should I Care?

For a start, if your insurance policy stipulated a deductible, it wasn't just your insurance company who had to pay. In a $10,000 accident with a $1,000 deductible, you have a stake in the outcome as well – to the tune of $1,000. If your insurance company is lax about bringing subrogation cases to court, it might choose to recoup its costs by increasing your premiums. On the other hand, if it knows which cases it is owed and pursues those cases efficiently, it is acting both in its own interests and in yours. 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 accountable), 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 more than 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 work injury lawyer whitewater wi, successfully press a subrogation case, it will recover your losses as well as its own.

All insurers are not created equal. When comparing, it's worth comparing the records of competing agencies to evaluate if they pursue winnable subrogation claims; if they resolve those claims without dragging their feet; if they keep their clients apprised as the case continues; and if they then process successfully won reimbursements immediately so that you can get your losses 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 covering its bottom line by raising your premiums, you should keep looking.

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