Subrogation and How It Affects Policyholders

Subrogation is a term that's well-known among insurance and legal firms but sometimes not by the policyholders they represent. Even if it sounds complicated, it is to your advantage to know the nuances of how it works. The more you know about it, the more likely it is that relevant proceedings will work out favorably.

Any insurance policy you hold is a commitment that, if something bad occurs, the company on the other end of the policy will make restitutions in one way or another in a timely manner. If your vehicle is hit, insurance adjusters (and the judicial system, when necessary) determine who was to blame and that person's insurance pays out.

But since figuring out who is financially accountable for services or repairs is usually a tedious, lengthy affair – and delay sometimes 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 path to recoup the costs if, in the end, they weren't in charge of the payout.

Let's Look at an Example

You arrive at the Instacare with a sliced-open finger. You give the nurse your health insurance card and she writes down your coverage information. You get stitches and your insurance company gets a bill for the medical care. But on the following afternoon, when you get to your place of employment – where the injury occurred – you are given workers compensation paperwork to fill out. Your employer's workers comp policy is in fact responsible for the payout, not your health insurance company. It has a vested interest in getting that money back somehow.

How Does Subrogation Work?

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 done to your self 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.

How Does This Affect Policyholders?

For a start, 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 – namely, $1,000. If your insurance company is timid on any subrogation case it might not win, it might choose to recover its expenses by increasing your premiums. On the other hand, if it has a capable legal team and goes after those cases enthusiastically, it is doing you a favor as well as itself. If all of the money is recovered, you will get your full $1,000 deductible back. If it recovers half (for instance, in a case where you are found one-half at fault), you'll typically get half your deductible back, depending on the laws in your state.

Additionally, if the total loss 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 auto accident lawyer Lithia springs GA, successfully press a subrogation case, it will recover your losses in addition to its own.

All insurance agencies are not the same. When shopping around, it's worth looking at the records of competing firms to evaluate whether they pursue legitimate subrogation claims; if they do so quickly; if they keep their accountholders informed as the case goes on; and if they then process successfully won reimbursements quickly 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 protecting its income by raising your premiums, you'll feel the sting later.