Subrogation is a concept that's well-known among insurance and legal companies but often not by the people they represent. Rather than leave it to the professionals, it is to your advantage to understand an overview of how it works. The more information you have about it, the better decisions you can make with regard to your insurance policy.
Any insurance policy you own 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 storm damages your real estate, for example, your property insurance steps in to repay you or pay for the repairs, subject to state property damage laws.
But since figuring out who is financially responsible for services or repairs is typically a tedious, lengthy affair – and delay often compounds the damage to the victim – insurance firms often decide to pay up front and figure out the blame after the fact. They then need a means to recover the costs if, once the situation is fully assessed, they weren't in charge of the expense.
Can You Give an Example?
You are in an auto accident. Another car crashed into yours. The police show up to assess the situation, you exchange insurance information, and you go on your way. You have comprehensive insurance that pays for the repairs right away. Later it's determined that the other driver was entirely at fault and her insurance policy should have paid for the repair of your vehicle. How does your company get its money back?
How Does Subrogation Work?
This is where subrogation comes in. It is the method that an insurance company uses to claim reimbursement when it pays out a claim that turned out not to be its responsibility. 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 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 the Insured?
For one thing, if your insurance policy stipulated a deductible, it wasn't just your insurer who 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 lax about bringing subrogation cases to court, it might choose to recoup its expenses by boosting your premiums and call it a day. On the other hand, if it has a knowledgeable legal team and pursues those cases aggressively, 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 50 percent at fault), you'll typically get half your deductible back, depending on your state laws.
In addition, if the total price 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 workman's comp insurance Manassas, VA, pursue subrogation and succeeds, it will recover your expenses in addition to its own.
All insurance agencies are not the same. When shopping around, it's worth examining the reputations of competing companies to determine whether they pursue valid subrogation claims; if they do so without dragging their feet; if they keep their clients updated as the case proceeds; 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, instead, an insurer has a record of honoring claims that aren't its responsibility and then covering its profitability by raising your premiums, you'll feel the sting later.