Subrogation is an idea that's understood among insurance and legal firms but rarely by the policyholders they represent. Even if you've never heard the word before, it is in your benefit to know the nuances of how it works. The more you know, the better decisions you can make with regard to your insurance policy.
Any insurance policy you have is a promise that, if something bad occurs, the company that insures the policy will make restitutions in one way or another without unreasonable delay. If your real estate suffers fire damage, your property insurance steps in to repay you or enable the repairs, subject to state property damage laws.
But since determining who is financially responsible for services or repairs is regularly a time-consuming affair – and time spent waiting sometimes adds to the damage to the policyholder – insurance companies often decide to pay up front and assign blame later. They then need a method to recoup the costs if, once the situation is fully assessed, they weren't actually responsible for the expense.
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 entirely at fault and his insurance should have paid for the repair of your vehicle. How does your company get its money back?
How Does Subrogation Work?
This is where subrogation comes in. It is the method that an insurance company uses to claim reimbursement 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 in exchange for having taken care of 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 your insurance policy stipulated 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 have a stake in the outcome as well – to be precise, $1,000. If your insurer is lax about bringing subrogation cases to court, it might opt to recoup its losses by upping your premiums and call it a day. On the other hand, if it knows which cases it is owed and pursues them efficiently, it is doing you a favor as well as itself. If all 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 responsible), you'll typically get $500 back, depending on the laws in your state.
In addition, if the total price of an accident is more than your maximum coverage amount, you could be in for a stiff bill. If your insurance company or its property damage lawyers, such as auto accident lawyer Austell GA, pursue subrogation and succeeds, it will recover your costs in addition to its own.
All insurers are not created equal. When shopping around, it's worth examining the reputations of competing companies to determine if they pursue valid subrogation claims; if they resolve those claims fast; if they keep their policyholders updated as the case continues; and if they then process successfully won reimbursements right away so that you can get your deductible back and move on with your life. If, on the other hand, an insurance firm has a reputation of honoring claims that aren't its responsibility and then safeguarding its profitability by raising your premiums, you should keep looking.