Subrogation and How It Affects Your Insurance

Subrogation is an idea that's understood in insurance and legal circles but often 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 understand the nuances of how it works. The more you know, the better decisions you can make about your insurance company.

Any insurance policy you hold is an assurance that, if something bad occurs, the business on the other end of the policy will make restitutions in one way or another without unreasonable delay. If your home suffers fire damage, your property insurance agrees to pay you or pay for the repairs, subject to state property damage laws.

But since figuring out who is financially accountable for services or repairs is typically a tedious, lengthy affair – and delay often increases the damage to the policyholder – insurance firms usually opt to pay up front and figure out the blame after the fact. They then need a means to regain the costs if, when all the facts are laid out, they weren't actually in charge of the expense.

Can You Give an Example?

Your kitchen catches fire and causes $10,000 in house damages. Fortunately, 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 a reasonable possibility that a judge would find him liable for the damages. You already have your money, but your insurance firm is out all that money. What does the firm do next?

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 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 done to your self or property. But under subrogation law, your insurance company is considered to have some of your rights in exchange 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 Do I Need to Know This?

For starters, if you have a deductible, it wasn't just your insurance company that 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 insurance company is timid on any subrogation case it might not win, it might opt to recover its expenses by raising your premiums. On the other hand, if it has a capable legal team and goes after them aggressively, it is doing you a favor as well as itself. If all ten grand is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found 50 percent accountable), you'll typically get $500 back, depending on the laws in your state.

In addition, if the total expense of an accident is more than your maximum coverage amount, you may have had to pay the difference. If your insurance company or its property damage lawyers, such as attorneys that specialize in auto accidents Marietta GA, 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 contrasting the reputations of competing firms to determine if they pursue legitimate subrogation claims; if they do so fast; if they keep their policyholders posted as the case goes on; and if they then process successfully won reimbursements right away so that you can get your funding back and move on with your life. If, instead, an insurance firm has a reputation of honoring claims that aren't its responsibility and then safeguarding its bottom line by raising your premiums, you should keep looking.