Subrogation is an idea that's well-known in insurance and legal circles but rarely by the policyholders who employ them. Even if you've never heard the word before, it would be in your self-interest to know the nuances of how it works. The more knowledgeable you are about it, the better decisions you can make with regard to your insurance company.
Every insurance policy you own is a promise that, if something bad occurs, the insurer of the policy will make restitutions in one way or another without unreasonable delay. If your home burns down, for example, your property insurance agrees to repay you or facilitate the repairs, subject to state property damage laws.
But since figuring out who is financially responsible for services or repairs is regularly a time-consuming affair – and delay sometimes increases the damage to the policyholder – insurance firms in many cases opt to pay up front and figure out the blame after the fact. They then need a method to get back the costs if, in the end, they weren't responsible for the payout.
Can You Give an Example?
You are in an auto accident. Another car collided with 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 at fault and her insurance should have paid for the repair of your auto. How does your insurance company get its funds back?
How Subrogation Works
This is where subrogation comes in. It is the process that an insurance company uses to claim payment 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. Normally, 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 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 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 – namely, $1,000. If your insurance company is unconcerned with pursuing subrogation even when it is entitled, it might choose to recover its costs by upping your premiums. On the other hand, if it has a capable legal team and pursues them efficiently, it is doing you a favor as well as itself. 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 50 percent at fault), you'll typically get $500 back, based on the laws in most states.
In addition, if the total loss of an accident is more than your maximum coverage amount, you may have had to pay the difference, which can be extremely expensive. If your insurance company or its property damage lawyers, such as accident attorney greater atlanta area, pursue subrogation and wins, it will recover your losses as well as its own.
All insurance companies are not created equal. When shopping around, it's worth looking at the reputations of competing agencies to find out whether they pursue valid subrogation claims; if they do so with some expediency; if they keep their policyholders advised as the case continues; and if they then process successfully won reimbursements quickly so that you can get your money back and move on with your life. If, on the other hand, an insurance firm has a record of paying out claims that aren't its responsibility and then protecting its bottom line by raising your premiums, you should keep looking.