Subrogation is an idea that's understood among insurance and legal companies but rarely by the policyholders they represent. Even if you've never heard the word before, it would be in your self-interest to comprehend the nuances of how it works. The more knowledgeable you are, the better decisions you can make with regard to your insurance company.
Every insurance policy you hold is an assurance that, if something bad happens to you, the business on the other end of the policy will make good in a timely manner. If a fire damages your home, for instance, your property insurance steps in to remunerate you or enable the repairs, subject to state property damage laws.
But since determining who is financially accountable for services or repairs is typically a confusing affair – and time spent waiting sometimes adds to the damage to the policyholder – insurance firms often opt to pay up front and assign blame after the fact. They then need a mechanism to regain the costs if, when all is said and done, they weren't in charge of the payout.
Let's Look at an Example
You are in an auto accident. Another car crashed into yours. Police are called, you exchange insurance information, and you go on your way. You have comprehensive insurance that pays for the repairs right away. Later police tell the insurance companies that the other driver was at fault and his insurance policy should have paid for the repair of your auto. How does your insurance company get its money back?
How Does Subrogation Work?
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 insurance firms 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 having taken care of the damages. It can go after the money originally due to you, because it has covered the amount already.
Why Do I Need to Know This?
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 have a stake in the outcome as well – to the tune of $1,000. If your insurer is lax about bringing subrogation cases to court, it might opt to recover its costs by increasing your premiums. 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 ten grand is recovered, you will get your full $1,000 deductible back. If it recovers half (for instance, in a case where you are found one-half culpable), you'll typically get $500 back, based on the laws in most states.
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 legal assistance payson ut, pursue subrogation and succeeds, it will recover your expenses as well as its own.
All insurance companies are not created equal. When comparing, it's worth looking at the reputations of competing companies to find out if they pursue winnable subrogation claims; if they do so without dragging their feet; if they keep their policyholders updated as the case continues; and if they then process successfully won reimbursements right away so that you can get your money back and move on with your life. If, on the other hand, an insurance firm has a record of paying out claims that aren't its responsibility and then protecting its income by raising your premiums, you'll feel the sting later.