Subrogation is a concept that's understood among insurance and legal firms but sometimes not by the customers they represent. Rather than leave it to the professionals, it is in your self-interest to understand the nuances of how it works. The more knowledgeable you are, the better decisions you can make about your insurance company.
An insurance policy you have is a commitment that, if something bad occurs, the business that insures the policy will make good in a timely manner. If a blizzard damages your house, for instance, your property insurance agrees to pay you or pay for the repairs, subject to state property damage laws.
But since determining who is financially accountable for services or repairs is sometimes a confusing affair – and delay sometimes compounds the damage to the victim – insurance firms usually opt to pay up front and assign blame after the fact. They then need a means to recoup the costs if, when all is said and done, they weren't in charge of the payout.
For Example
Your stove catches fire and causes $10,000 in house damages. Fortunately, you have property insurance and it pays out your claim in full. However, the assessor assigned to your case discovers that an electrician had installed some faulty wiring, and there is a decent chance that a judge would find him to blame for the damages. You already have your money, but your insurance agency is out $10,000. What does the agency do next?
How Subrogation Works
This is where subrogation comes in. It is the process that an insurance company uses to claim payment 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 to your person or property. But under subrogation law, your insurance company is considered to have some of your rights 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 one thing, if you have 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 lost some money too – to the tune of $1,000. If your insurance company is lax about bringing subrogation cases to court, it might opt to recover its costs by upping your premiums and call it a day. On the other hand, if it knows which cases it is owed and goes after them aggressively, it is acting both in its own interests and in yours. 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 culpable), you'll typically get half your deductible back, depending on the laws in your state.
Furthermore, if the total price of an accident is over your maximum coverage amount, you could be in for a stiff bill. If your insurance company or its property damage lawyers, such as fathers custody rights Henderson NV, pursue subrogation and wins, it will recover your losses as well as its own.
All insurers are not created equal. When comparing, it's worth weighing the reputations of competing agencies to determine whether they pursue legitimate subrogation claims; if they resolve those claims quickly; if they keep their customers apprised as the case proceeds; and if they then process successfully won reimbursements immediately so that you can get your funding back and move on with your life. If, instead, an insurance company has a reputation of paying out claims that aren't its responsibility and then covering its income by raising your premiums, you should keep looking.