Subrogation is a term that's understood among insurance and legal professionals but rarely by the policyholders they represent. Rather than leave it to the professionals, it would be to your advantage to know an overview of how it works. The more knowledgeable you are, the better decisions you can make about your insurance policy.
Every 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 a windstorm damages your home, your property insurance steps in to repay you or facilitate the repairs, subject to state property damage laws.
But since figuring out who is financially responsible for services or repairs is often a confusing affair – and delay in some cases compounds the damage to the victim – insurance companies often opt to pay up front and assign blame later. They then need a mechanism to get back the costs if, ultimately, they weren't in charge of the expense.
Can You Give an Example?
Your living room catches fire and causes $10,000 in house damages. Happily, you have property insurance and it pays for the repairs. However, the insurance investigator discovers that an electrician had installed some faulty wiring, and there is a decent chance that a judge would find him responsible for the damages. The home has already been repaired in the name of expediency, but your insurance agency is out ten grand. What does the agency 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 insurance firms have in-house property damage lawyers and personal injury attorneys, or a department dedicated to subrogation; others contract with a law firm. Usually, 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 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.
How Does This Affect Me?
For a start, if you have a deductible, it wasn't just your insurance company who had to pay. In a $10,000 accident with a $1,000 deductible, you have a stake in the outcome as well – to the tune of $1,000. If your insurer is lax about bringing subrogation cases to court, it might opt to recoup 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 those cases aggressively, it is doing you a favor as well as itself. If all $10,000 is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found 50 percent to blame), you'll typically get $500 back, based on the laws in most states.
Additionally, if the total expense 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 wills and estate planning paddock lake wi, pursue subrogation and wins, it will recover your losses as well as its own.
All insurance companies are not created equal. When shopping around, it's worth measuring the reputations of competing firms to determine if they pursue winnable subrogation claims; if they do so quickly; if they keep their customers posted as the case goes on; and if they then process successfully won reimbursements right away so that you can get your deductible back and move on with your life. If, instead, an insurer has a reputation of paying out claims that aren't its responsibility and then covering its profit margin by raising your premiums, you'll feel the sting later.wills and estate planning paddock lake wi