Subrogation and How It Affects Your Insurance Policy

Subrogation is a concept that's well-known among legal and insurance professionals but rarely by the people who employ them. Rather than leave it to the professionals, it is in your self-interest to know an overview of how it works. The more you know, the more likely it is that relevant proceedings will work out favorably.

An insurance policy you have is an assurance that, if something bad occurs, the insurer of the policy will make restitutions in one way or another in a timely fashion. If your property is broken into, for example, your property insurance agrees to compensate you or facilitate the repairs, subject to state property damage laws.

But since determining who is financially responsible for services or repairs is sometimes a confusing affair – and delay in some cases increases the damage to the policyholder – insurance firms in many cases decide to pay up front and assign blame after the fact. They then need a method to get back the costs if, once the situation is fully assessed, they weren't actually responsible for the payout.

Can You Give an Example?

You are in a car accident. Another car collided with 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 at fault and her insurance policy should have paid for the repair of your car. How does your insurance company get its funds back?

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 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 insurer 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 starters, if you have a deductible, it wasn't just your insurer 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 choose to recoup its costs by increasing your premiums. On the other hand, if it has a competent legal team and pursues them enthusiastically, it is acting both in its own interests and in yours. 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 responsible), you'll typically get $500 back, depending on the laws in your state.

Moreover, 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 workers comp lawyer Duluth, successfully press a subrogation case, it will recover your expenses as well as its own.

All insurance agencies are not created equal. When comparing, it's worth contrasting the reputations of competing companies to determine whether they pursue valid subrogation claims; if they resolve those claims without dragging their feet; if they keep their policyholders posted as the case continues; and if they then process successfully won reimbursements immediately so that you can get your money back and move on with your life. If, instead, an insurance agency has a record of honoring claims that aren't its responsibility and then safeguarding its profit margin by raising your premiums, you should keep looking.

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