Subrogation is a term that's well-known among legal and insurance professionals but often not by the people who hire them. Even if you've never heard the word before, it would be in your benefit to comprehend the steps of how it works. The more knowledgeable you are about it, the better decisions you can make about your insurance company.
Any insurance policy you own is a promise that, if something bad happens to you, the business that covers the policy will make good in one way or another in a timely manner. If your home is robbed, for instance, your property insurance agrees to pay you or facilitate the repairs, subject to state property damage laws.
But since ascertaining who is financially responsible for services or repairs is often a heavily involved affair – and time spent waiting often increases the damage to the policyholder – insurance companies often opt to pay up front and figure out the blame afterward. They then need a path to regain the costs if, when there is time to look at all the facts, they weren't in charge of the expense.
Let's Look at an Example
You are in an auto accident. Another car crashed into yours. Police are called, you exchange insurance details, 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 to blame and his insurance should have paid for the repair of your vehicle. How does your insurance company get its money back?
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 person or property. But under subrogation law, your insurance company is extended some of your rights 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 a start, if your insurance policy stipulated a deductible, your insurance company wasn't the only one that 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 insurer is timid on any subrogation case it might not win, it might choose to recover its losses by upping your premiums and call it a day. On the other hand, if it has a competent legal team and goes after those cases efficiently, it is doing you a favor as well as itself. If all $10,000 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 responsible), you'll typically get half your deductible back, based on the laws in most states.
Additionally, if the total cost 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 civil law morgan hill ca, successfully press a subrogation case, it will recover your costs in addition to its own.
All insurers are not created equal. When shopping around, it's worth comparing the reputations of competing companies to determine if they pursue legitimate subrogation claims; if they do so with some expediency; if they keep their policyholders apprised as the case continues; 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 insurance agency has a reputation of paying out claims that aren't its responsibility and then covering its income by raising your premiums, you should keep looking.