Subrogation is a concept that's understood in legal and insurance circles but rarely by the policyholders they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it would be to your advantage to understand the steps of the process. The more knowledgeable you are about it, the better decisions you can make about your insurance company.
An insurance policy you own is a promise that, if something bad occurs, the firm that covers the policy will make good in one way or another in a timely manner. If your home is broken into, your property insurance steps in to repay you or facilitate the repairs, subject to state property damage laws.
But since ascertaining who is financially accountable for services or repairs is typically a confusing affair – and time spent waiting sometimes increases the damage to the policyholder – insurance companies usually decide to pay up front and figure out the blame afterward. They then need a way to get back the costs if, when there is time to look at all the facts, they weren't actually responsible for the payout.
Can You Give an Example?
Your stove catches fire and causes $10,000 in home damages. Fortunately, you have property insurance and it takes care of the repair expenses. However, in its investigation it finds out that an electrician had installed some faulty wiring, and there is a decent chance that a judge would find him responsible for the loss. You already have your money, but your insurance company is out ten grand. What does the company do next?
How Subrogation Works
This is where subrogation comes in. It is the process that an insurance company uses to claim reimbursement 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 to your self or property. But under subrogation law, your insurance company is extended 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.
How Does This Affect Individuals?
For a start, if your insurance policy stipulated a deductible, your insurance company wasn't the only one 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 timid on any subrogation case it might not win, it might opt to get back its costs by ballooning your premiums and call it a day. On the other hand, if it knows which cases it is owed and goes after them efficiently, it is acting both in its own interests and in yours. If all ten grand 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 accountable), you'll typically get half your deductible back, depending on the laws in your state.
In addition, if the total cost 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 workmans comp Columbus, ga, successfully press a subrogation case, it will recover your expenses as well as its own.
All insurance companies are not created equal. When comparing, it's worth researching the reputations of competing firms to determine if they pursue legitimate subrogation claims; if they do so in a reasonable amount of time; if they keep their policyholders apprised as the case goes on; and if they then process successfully won reimbursements immediately so that you can get your money back and move on with your life. If, on the other hand, an insurer has a record of honoring claims that aren't its responsibility and then safeguarding its bottom line by raising your premiums, you'll feel the sting later.