Subrogation is a concept that's understood in insurance and legal circles but often not by the policyholders who employ them. Even if you've never heard the word before, it is to your advantage to comprehend an overview of how it works. The more you know about it, the better decisions you can make about your insurance company.
Any insurance policy you hold is an assurance that, if something bad occurs, the company that insures the policy will make good in one way or another in a timely fashion. If you get hurt at work, your employer's workers compensation agrees to pay for medical services. Employment lawyers handle the details; you just get fixed up.
But since figuring out who is financially accountable for services or repairs is typically a tedious, lengthy affair – and delay in some cases adds to the damage to the policyholder – insurance firms usually opt to pay up front and assign blame afterward. They then need a path to get back the costs if, when there is time to look at all the facts, they weren't actually responsible for the payout.
Can You Give an Example?
Your electric outlet catches fire and causes $10,000 in home damages. Happily, you have property insurance and it pays for the repairs. However, in its investigation it finds out 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 company is out ten grand. What does the company do next?
How Does Subrogation Work?
This is where subrogation comes in. It is the process 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 done to your self or property. But under subrogation law, your insurer is extended some of your rights for having taken care of the damages. It can go after the money originally due to you, because it has covered the amount already.
How Does This Affect Individuals?
For starters, if your insurance policy stipulated a deductible, it wasn't just your insurer who had to pay. In a $10,000 accident with a $1,000 deductible, you have a stake in the outcome as well – namely, $1,000. If your insurance company is lax about bringing subrogation cases to court, it might opt to recoup its expenses by boosting your premiums and call it a day. On the other hand, if it knows which cases it is owed and goes after those cases efficiently, it is doing you a favor as well as itself. If all $10,000 is recovered, you will get your full $1,000 deductible back. If it recovers half (for instance, in a case where you are found 50 percent at fault), you'll typically get $500 back, depending on your state laws.
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 accident injury lawyers decatur, ga, successfully press a subrogation case, it will recover your losses as well as its own.
All insurance companies are not the same. When comparing, it's worth weighing the reputations of competing agencies to determine if they pursue legitimate subrogation claims; if they do so in a reasonable amount of time; if they keep their accountholders updated as the case goes on; and if they then process successfully won reimbursements right away so that you can get your funding back and move on with your life. If, on the other hand, an insurer has a reputation of paying out claims that aren't its responsibility and then protecting its profit margin by raising your premiums, even attractive rates won't outweigh the eventual headache.