Subrogation is a concept that's well-known among insurance and legal companies but often not by the customers who employ them. If this term has come up when dealing with your insurance agent or a legal proceeding, it would be in your self-interest to comprehend an overview of the process. The more knowledgeable you are, the better decisions you can make with regard to your insurance policy.
An insurance policy you own is an assurance that, if something bad occurs, the insurer of the policy will make restitutions without unreasonable delay. If your home is burglarized, your property insurance agrees to compensate you or pay for the repairs, subject to state property damage laws.
But since ascertaining who is financially responsible for services or repairs is typically a time-consuming affair – and time spent waiting sometimes adds to the damage to the policyholder – insurance firms usually decide to pay up front and assign blame after the fact. They then need a method to get back the costs if, ultimately, they weren't responsible for the expense.
Let's Look at an Example
Your garage catches fire and causes $10,000 in house damages. Fortunately, you have property insurance and it takes care of the repair expenses. However, in its investigation it discovers that an electrician had installed some faulty wiring, and there is a decent chance that a judge would find him responsible for the damages. The home has already been repaired in the name of expediency, but your insurance agency is out ten grand. What does the agency do next?
How Subrogation Works
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. Normally, only you can sue for damages done to your person or property. But under subrogation law, your insurer is given 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.
Why Should I Care?
For one thing, if your insurance policy stipulated a deductible, your insurer wasn't the only one that 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 unconcerned with pursuing subrogation even when it is entitled, it might opt to get back its expenses by boosting your premiums and call it a day. On the other hand, if it has a proficient legal team and pursues them enthusiastically, 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 half your deductible back, based on the laws in most states.
Additionally, if the total loss 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 car accident attorney Norcross GA, successfully press a subrogation case, it will recover your expenses in addition to its own.
All insurers are not created equal. When shopping around, it's worth contrasting the reputations of competing agencies to determine if they pursue valid subrogation claims; if they do so quickly; if they keep their policyholders advised 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 insurer has a reputation of paying out claims that aren't its responsibility and then safeguarding its bottom line by raising your premiums, even attractive rates won't outweigh the eventual headache.