Subrogation and How It Affects Your Insurance Policy

Subrogation is a concept that's understood in insurance and legal circles but sometimes not by the policyholders they represent. Rather than leave it to the professionals, it would be to your advantage to understand the nuances of how it works. The more information you have about it, the more likely an insurance lawsuit will work out favorably.

Every insurance policy you have is a promise that, if something bad occurs, the firm that insures the policy will make restitutions in one way or another in a timely manner. If your vehicle is in a fender-bender, insurance adjusters (and the courts, when necessary) determine who was at fault and that party's insurance pays out.

But since determining who is financially responsible for services or repairs is often a heavily involved affair – and delay in some cases adds to the damage to the victim – insurance companies in many cases opt to pay up front and figure out the blame later. They then need a method to recover the costs if, when there is time to look at all the facts, they weren't responsible for the payout.

Can You Give an Example?

Your bedroom catches fire and causes $10,000 in house damages. Happily, you have property insurance and it pays out your claim in full. 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 responsible 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 reimbursement after it has paid for something that should have been paid by some other entity. Some companies have in-house property damage lawyers and personal injury attorneys, or a department dedicated to subrogation; others contract with a law firm. Ordinarily, 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 originally due to you, because it has covered the amount already.

How Does This Affect Individuals?

For starters, if your insurance policy stipulated a deductible, it wasn't just your insurance company who had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – namely, $1,000. If your insurance company is unconcerned with pursuing subrogation even when it is entitled, it might choose to recover its losses by upping your premiums. On the other hand, if it knows which cases it is owed and pursues them enthusiastically, it is doing you a favor as well as itself. If all of the money is recovered, you will get your full thousand-dollar deductible back. If it recovers half (for instance, in a case where you are found one-half at fault), you'll typically get $500 back, based on the laws in most states.

Moreover, 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 Rosedale MD, successfully press a subrogation case, it will recover your costs in addition to its own.

All insurers are not the same. When comparing, it's worth looking at the reputations of competing firms to determine if they pursue winnable subrogation claims; if they do so in a reasonable amount of time; if they keep their policyholders updated as the case proceeds; and if they then process successfully won reimbursements quickly so that you can get your deductible back and move on with your life. If, instead, an insurance firm has a reputation of honoring claims that aren't its responsibility and then safeguarding its bottom line by raising your premiums, you'll feel the sting later.

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