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Subrogation and How It Affects Policyholders

Subrogation is a term that's well-known in insurance and legal circles but sometimes not by the people who hire them. Even if you've never heard the word before, it is in your self-interest to understand an overview of how it works. The more information you have about it, the more likely it is that relevant proceedings will work out in your favor.

An insurance policy you hold is an assurance that, if something bad occurs, the insurer of the policy will make good in one way or another without unreasonable delay. If your house is broken into, your property insurance agrees to pay you or pay for the repairs, subject to state property damage laws.

But since determining who is financially responsible for services or repairs is usually a confusing affair – and delay in some cases increases the damage to the victim – insurance companies in many cases decide to pay up front and figure out the blame later. They then need a means to recoup the costs if, when all the facts are laid out, they weren't in charge of the expense.

Let's Look at an Example

Your bedroom catches fire and causes $10,000 in house damages. Happily, you have property insurance and it takes care of the repair expenses. However, in its investigation it discovers that an electrician had installed some faulty wiring, and there is a reasonable possibility that a judge would find him to blame for the loss. You already have your money, but your insurance firm is out $10,000. What does the firm do next?

How Does Subrogation Work?

This is where subrogation comes in. It is the way that an insurance company uses to claim payment 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 insurer is extended 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.

How Does This Affect the Insured?

For starters, 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 insurer is lax about bringing subrogation cases to court, it might choose to get back its costs by increasing your premiums and call it a day. On the other hand, if it knows which cases it is owed and pursues them efficiently, it is doing you a favor as well as itself. If all ten grand is recovered, you will get your full thousand-dollar deductible back. If it recovers half (for instance, in a case where you are found 50 percent culpable), you'll typically get $500 back, based on the laws in most states.

Furthermore, if the total cost of an accident is over your maximum coverage amount, you may have had to pay the difference, which can be extremely spendy. If your insurance company or its property damage lawyers, such as workmans comp Milton, ga, successfully press a subrogation case, it will recover your expenses in addition to its own.

All insurers are not created equal. When comparing, it's worth contrasting the reputations of competing firms to evaluate if they pursue legitimate subrogation claims; if they resolve those claims in a reasonable amount of time; if they keep their accountholders apprised as the case continues; and if they then process successfully won reimbursements quickly so that you can get your deductible back and move on with your life. If, on the other hand, an insurer has a record of paying out claims that aren't its responsibility and then covering its profit margin by raising your premiums, even attractive rates won't outweigh the eventual headache.