Subrogation is a concept that's understood in legal and insurance circles but rarely by the policyholders who employ them. Even if you've never heard the word before, it is to your advantage to understand the nuances of the process. The more information you have, the better decisions you can make with regard to your insurance company.
An insurance policy you hold is an assurance that, if something bad occurs, the business on the other end of the policy will make good in one way or another without unreasonable delay. If your vehicle is rear-ended, insurance adjusters (and the judicial system, when necessary) decide who was to blame and that party's insurance pays out.
But since ascertaining who is financially responsible for services or repairs is regularly a confusing affair – and time spent waiting sometimes increases the damage to the victim – insurance companies often decide to pay up front and assign blame after the fact. They then need a path to recoup the costs if, once the situation is fully assessed, they weren't actually in charge of the expense.
Let's Look at an Example
You are in an auto 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 and file a repair claim. Later it's determined that the other driver was to blame and his insurance policy should have paid for the repair of your car. How does your company get its money back?
How Does Subrogation Work?
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 to your person or property. But under subrogation law, your insurance company is extended some of your rights in exchange 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 you have a deductible, your insurance company wasn't the only one who had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – to the tune of $1,000. If your insurer is timid on any subrogation case it might not win, it might opt to get back its costs by increasing your premiums and call it a day. On the other hand, if it knows which cases it is owed and pursues those cases aggressively, it is acting both in its own interests and in yours. If all $10,000 is recovered, you will get your full thousand-dollar deductible back. If it recovers half (for instance, in a case where you are found 50 percent at fault), you'll typically get $500 back, depending on your state laws.
Furthermore, if the total loss 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 real estate law Lake Geneva, WI, successfully press a subrogation case, it will recover your costs in addition to its own.
All insurance agencies are not the same. When shopping around, it's worth weighing the records of competing firms to evaluate whether they pursue legitimate subrogation claims; if they do so in a reasonable amount of time; if they keep their policyholders updated as the case goes on; and if they then process successfully won reimbursements right away so that you can get your losses back and move on with your life. If, instead, an insurer has a record of paying out claims that aren't its responsibility and then safeguarding its income by raising your premiums, even attractive rates won't outweigh the eventual headache.