Subrogation and How It Affects Your Insurance

Subrogation is a term that's well-known in legal and insurance circles but sometimes not by the policyholders who hire them. Even if you've never heard the word before, it would be to your advantage to understand the nuances of the process. The more information you have about it, the better decisions you can make with regard to your insurance company.

An insurance policy you own is a promise that, if something bad occurs, the firm on the other end of the policy will make good without unreasonable delay. If you get injured while working, your employer's workers compensation picks up the tab for medical services. Employment lawyers handle the details; you just get fixed up.

But since determining who is financially accountable for services or repairs is often a tedious, lengthy affair – and time spent waiting often increases 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 path to get back the costs if, once the situation is fully assessed, they weren't actually in charge of the expense.

For Example

You are in a car accident. Another car collided with yours. The police show up to assess the situation, 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 vehicle. How does your insurance company get its money back?

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. Under ordinary circumstances, only you can sue for damages to your self or property. But under subrogation law, your insurer is given some of your rights in exchange for making good on 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 a start, if your insurance policy stipulated a deductible, it wasn't just your insurer that had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – namely, $1,000. If your insurer is lax about bringing subrogation cases to court, it might choose to recoup its losses by increasing your premiums. On the other hand, if it knows which cases it is owed and goes after them enthusiastically, it is acting both in its own interests and in yours. If all is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found 50 percent accountable), you'll typically get half your deductible back, depending on the laws in your state.

Additionally, 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 legal representation Tumwater, WA, successfully press a subrogation case, it will recover your expenses in addition to its own.

All insurance agencies are not the same. When shopping around, it's worth looking at the reputations of competing firms to determine if they pursue legitimate subrogation claims; if they do so without dragging their feet; if they keep their accountholders advised as the case continues; and if they then process successfully won reimbursements right away so that you can get your losses 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, even attractive rates won't outweigh the eventual headache.