Subrogation is an idea that's understood among insurance and legal firms but often not by the people who employ them. If this term has come up when dealing with your insurance agent or a legal proceeding, it is in your self-interest to understand an overview of how it works. The more you know about it, the more likely relevant proceedings will work out favorably.
Every insurance policy you hold is a promise that, if something bad happens to you, the business that insures the policy will make restitutions in one way or another without unreasonable delay. If a windstorm damages your home, for instance, your property insurance steps in to pay you or facilitate the repairs, subject to state property damage laws.
But since determining who is financially responsible for services or repairs is sometimes a tedious, lengthy affair aa‚¬" and delay in some cases compounds the damage to the victim aa‚¬" insurance firms in many cases opt to pay up front and figure out the blame after the fact. They then need a method to recoup the costs if, when all is said and done, they weren't responsible for the expense.
Can You Give an Example?
Your kitchen catches fire and causes $10,000 in house damages. Fortunately, you have property insurance and it takes care of the repair expenses. 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 responsible for the loss. The home has already been fixed up in the name of expediency, but your insurance agency is out ten grand. What does the agency 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. Normally, only you can sue for damages to your person or property. But under subrogation law, your insurance company is given some of your rights in exchange for making good on the damages. It can go after the money that was 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, your insurance company wasn't the only one who had to pay. In a $10,000 accident with a $1,000 deductible, you have a stake in the outcome as well aa‚¬" to the tune of $1,000. If your insurance company is lax about bringing subrogation cases to court, it might opt to get back its costs by raising your premiums and call it a day. On the other hand, if it knows which cases it is owed and goes after them enthusiastically, it is doing you a favor as well as itself. If all 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, depending on your state laws.
Moreover, if the total loss of an accident is over your maximum coverage amount, you may have had to pay the difference, which can be extremely expensive. If your insurance company or its property damage lawyers, such as worker compensation terms Sandy Springs GA, pursue subrogation and wins, it will recover your costs as well as its own.
All insurance agencies are not created equal. When shopping around, it's worth measuring the reputations of competing companies to evaluate if they pursue valid subrogation claims; if they do so with some expediency; if they keep their policyholders informed as the case proceeds; and if they then process successfully won reimbursements right away so that you can get your funding back and move on with your life. If, instead, an insurer has a record of paying out claims that aren't its responsibility and then covering its profitability by raising your premiums, even attractive rates won't outweigh the eventual headache.