The Things Every Insurance Policy holder Ought to Know About Subrogation

Subrogation is a term that's well-known in legal and insurance circles but rarely by the policyholders they represent. Even if you've never heard the word before, it is in your benefit to know an overview of how it works. The more you know about it, the better decisions you can make with regard to your insurance company.

Any insurance policy you have is a promise that, if something bad occurs, the insurer of the policy will make restitutions without unreasonable delay. If your vehicle is rear-ended, insurance adjusters (and the judicial system, when necessary) decide who was to blame and that person's insurance covers the damages.

But since ascertaining who is financially responsible for services or repairs is often a tedious, lengthy affair – and delay often adds to the damage to the victim – insurance firms often opt to pay up front and assign blame later. They then need a way to recoup the costs if, when all the facts are laid out, they weren't actually in charge of the expense.

For Example

Your electric outlet catches fire and causes $10,000 in home damages. Happily, you have property insurance and it pays out your claim in full. 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 liable for the damages. You already have your money, but your insurance company is out ten grand. What does the company do next?

How Subrogation Works

This is where subrogation comes in. It is the method 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 self or property. But under subrogation law, your insurer is extended some of your rights in exchange for making good on 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 one thing, if you have a deductible, it wasn't just your insurer who had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – to be precise, $1,000. If your insurance company is lax about bringing subrogation cases to court, it might opt to get back its expenses 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 acting both in its own interests and in yours. If all of the money 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 at fault), you'll typically get $500 back, based on the laws in most states.

Additionally, if the total cost 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 auto accident lawyer Lithia Springs GA, pursue subrogation and succeeds, it will recover your losses in addition to its own.

All insurance companies are not created equal. When shopping around, it's worth examining the records of competing agencies to determine if they pursue winnable subrogation claims; if they resolve those claims fast; if they keep their customers 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, instead, an insurance firm has a reputation of paying out claims that aren't its responsibility and then covering its income by raising your premiums, even attractive rates won't outweigh the eventual headache.