Subrogation and How It Affects Policyholders
Subrogation is a term that's understood among insurance and legal companies but often not by the policyholders who hire them. Even if you've never heard the word before, it is to your advantage to understand the nuances of how it works. The more you know, the more likely it is that an insurance lawsuit will work out favorably.
Any insurance policy you have is an assurance that, if something bad happens to you, the insurer of the policy will make restitutions in a timely fashion. If your vehicle is hit, insurance adjusters (and the courts, when necessary) decide who was at fault and that person's insurance covers the damages.
But since determining who is financially responsible for services or repairs is regularly a heavily involved affair – and delay in some cases compounds the damage to the victim – insurance firms often decide to pay up front and assign blame after the fact. They then need a mechanism 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 ran into yours. Police are called, you exchange insurance details, 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 at fault and his insurance policy should have paid for the repair of your car. How does your insurance company get its money back?
How Does Subrogation Work?
This is where subrogation comes in. It is the process 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. Normally, only you can sue for damages done to your self or property. But under subrogation law, your insurer is considered to have 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 one thing, if you have 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 unconcerned with pursuing subrogation even when it is entitled, it might choose to recoup its costs by ballooning your premiums and call it a day. On the other hand, if it has a competent legal team and pursues them aggressively, it is doing you a favor as well as itself. If all $10,000 is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found 50 percent responsible), you'll typically get $500 back, based on the laws in most states.
Furthermore, 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 injury claims Tacoma, WA, pursue subrogation and wins, it will recover your costs in addition to its own.
All insurance agencies are not the same. When shopping around, it's worth looking at the records of competing agencies to determine whether they pursue valid subrogation claims; if they do so quickly; if they keep their customers posted as the case continues; and if they then process successfully won reimbursements right away so that you can get your deductible back and move on with your life. If, on the other hand, an insurance company has a record of honoring claims that aren't its responsibility and then protecting its income by raising your premiums, even attractive rates won't outweigh the eventual headache.