Subrogation is a term that's understood in legal and insurance circles but rarely by the people who employ them. Even if you've never heard the word before, it is in your self-interest to comprehend the steps of how it works. The more information you have, the better decisions you can make with regard to your insurance policy.
An insurance policy you own is a promise that, if something bad happens to you, the insurer of the policy will make good in one way or another in a timely fashion. If your home burns down, your property insurance agrees to pay you or pay for the repairs, subject to state property damage laws.
But since figuring out who is financially accountable for services or repairs is regularly a time-consuming affair – and delay sometimes compounds the damage to the policyholder – insurance firms often decide to pay up front and figure out the blame afterward. They then need a mechanism to recover the costs if, when all is said and done, they weren't actually responsible for the expense.
Can You Give an Example?
Your kitchen catches fire and causes $10,000 in home damages. Fortunately, you have property insurance and it pays for the repairs. 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 liable for the loss. You already have your money, but your insurance firm is out all that money. What does the firm do next?
How Subrogation Works
This is where subrogation comes in. It is the method 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. Usually, only you can sue for damages done to your person or property. But under subrogation law, your insurer is extended some of your rights in exchange for having taken care of the damages. It can go after the money that was originally due to you, because it has covered the amount already.
Why Do I Need to Know This?
For one thing, if your insurance policy stipulated a deductible, your insurer wasn't the only one 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 insurance company is lax about bringing subrogation cases to court, it might opt to get back its expenses by increasing your premiums and call it a day. On the other hand, if it knows which cases it is owed and pursues them enthusiastically, it is acting both in its own interests and in yours. If all $10,000 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 $500 back, depending on the laws in your state.
Moreover, if the total cost of an accident is over your maximum coverage amount, you may have had to pay the difference. If your insurance company or its property damage lawyers, such as patent infringement 77092, successfully press a subrogation case, it will recover your expenses as well as its own.
All insurers are not created equal. When comparing, it's worth comparing the reputations of competing agencies to find out whether they pursue valid subrogation claims; if they resolve those claims fast; if they keep their customers posted as the case goes on; and if they then process successfully won reimbursements immediately so that you can get your losses back and move on with your life. If, on the other hand, an insurer has a reputation of paying out claims that aren't its responsibility and then covering its profitability by raising your premiums, you'll feel the sting later.