The Things Every Policy holder Ought to Know About Subrogation
Subrogation is a term that's understood among insurance and legal firms but sometimes not 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 know an overview of how it works. The more knowledgeable you are, the more likely an insurance lawsuit will work out favorably.
Every insurance policy you own is an assurance that, if something bad occurs, the company that covers the policy will make restitutions in one way or another without unreasonable delay. If your vehicle is rear-ended, insurance adjusters (and the judicial system, when necessary) decide who was at fault and that party's insurance covers the damages.
But since determining who is financially responsible for services or repairs is regularly a tedious, lengthy affair – and delay in some cases adds to the damage to the policyholder – insurance firms often decide to pay up front and assign blame after the fact. They then need a method to regain the costs if, in the end, they weren't actually responsible for the payout.
Let's Look at an Example
Your electric outlet catches fire and causes $10,000 in home damages. Fortunately, you have property insurance and it pays for the repairs. However, the insurance investigator finds out that an electrician had installed some faulty wiring, and there is a reasonable possibility that a judge would find him accountable for the damages. You already have your money, but your insurance firm is out ten grand. What does the firm do next?
How Subrogation Works
This is where subrogation comes in. It is the way that an insurance company uses to claim payment 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. Usually, only you can sue for damages done to your person or property. But under subrogation law, your insurer is given some of your rights 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 Does This Matter to Me?
For starters, if your insurance policy stipulated a deductible, your insurer wasn't the only one that 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 choose to recoup its expenses by raising your premiums. On the other hand, if it knows which cases it is owed and goes after those cases efficiently, it is doing you a favor as well as itself. If all ten grand is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found one-half responsible), you'll typically get $500 back, based on the laws in most states.
Furthermore, if the total expense of an accident is more than your maximum coverage amount, you may have had to pay the difference, which can be extremely costly. If your insurance company or its property damage lawyers, such as workers comp attorney Lithia Springs GA, successfully press a subrogation case, it will recover your losses in addition to its own.
All insurance companies are not the same. When shopping around, it's worth weighing the records of competing firms to determine if they pursue valid subrogation claims; if they do so without delay; if they keep their accountholders updated as the case proceeds; and if they then process successfully won reimbursements right away so that you can get your losses 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 should keep looking.