Subrogation is an idea that's understood among insurance and legal companies but rarely by the policyholders who hire them. Even if it sounds complicated, it would be in your self-interest to understand the steps of how it works. The more you know about it, the better decisions you can make about your insurance policy.
Any insurance policy you have is an assurance that, if something bad happens to you, the company on the other end of the policy will make good in one way or another in a timely manner. If your house is broken into, for example, your property insurance steps in to remunerate you or facilitate the repairs, subject to state property damage laws.
But since determining who is financially accountable for services or repairs is sometimes a time-consuming affair – and delay often compounds the damage to the policyholder – insurance companies usually decide to pay up front and assign blame afterward. They then need a way to recover the costs if, once the situation is fully assessed, they weren't responsible for the payout.
Let's Look at an Example
Your electric outlet catches fire and causes $10,000 in house damages. Luckily, you have property insurance and it takes care of the repair expenses. However, the assessor assigned to your case discovers that an electrician had installed some faulty wiring, and there is a reasonable possibility that a judge would find him liable for the loss. 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 way that an insurance company uses to claim payment 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 to your self or property. But under subrogation law, your insurance company is considered to have some of your rights 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 one thing, 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 – to be precise, $1,000. If your insurance company is unconcerned with pursuing subrogation even when it is entitled, it might opt to get back its costs by increasing your premiums. On the other hand, if it knows which cases it is owed and goes after those cases enthusiastically, 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 50 percent accountable), you'll typically get $500 back, depending on the laws in your state.
Additionally, if the total expense 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 car injury lawyer Canton, ga, pursue subrogation and succeeds, it will recover your losses as well as its own.
All insurance agencies are not the same. When comparing, it's worth looking at the reputations of competing companies to evaluate whether they pursue winnable subrogation claims; if they do so in a reasonable amount of time; if they keep their policyholders updated 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, instead, an insurance agency has a reputation of paying out claims that aren't its responsibility and then safeguarding its profit margin by raising your premiums, you'll feel the sting later.