Subrogation and How It Affects Your Insurance Policy

Subrogation is an idea that's well-known among insurance and legal professionals but often not by the policyholders they represent. Even if it sounds complicated, it would be in your benefit to know an overview of how it works. The more knowledgeable you are about it, the more likely it is that relevant proceedings will work out in your favor.

Any insurance policy you own is a promise that, if something bad occurs, the business that covers the policy will make restitutions in one way or another in a timely fashion. If your house suffers fire damage, your property insurance steps in to compensate you or pay for the repairs, subject to state property damage laws.

But since figuring out who is financially accountable for services or repairs is typically a confusing affair – and delay often increases the damage to the policyholder – insurance companies often decide to pay up front and assign blame later. They then need a path to recoup the costs if, in the end, they weren't actually in charge of the payout.

For Example

Your kitchen 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 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 loss. The home has already been fixed up in the name of expediency, but your insurance agency is out $10,000. 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 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 person or property. But under subrogation law, your insurer is considered to have 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 Me?

For one thing, 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 have a stake in the outcome as well – to the tune of $1,000. If your insurer is unconcerned with pursuing subrogation even when it is entitled, it might opt to recover its expenses by increasing your premiums and call it a day. On the other hand, if it has a competent legal team and goes after those cases aggressively, it is doing you a favor as well as itself. If all ten grand is recovered, you will get your full 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.

In addition, if the total loss of an accident is over your maximum coverage amount, you may have had to pay the difference. If your insurance company or its property damage lawyers, such as attorneys for disability claims paddock lake wi, successfully press a subrogation case, it will recover your expenses as well as its own.

All insurers are not the same. When shopping around, it's worth looking up the records of competing agencies to find out if they pursue valid subrogation claims; if they resolve those claims quickly; if they keep their customers informed as the case continues; and if they then process successfully won reimbursements immediately so that you can get your losses back and move on with your life. If, on the other hand, an insurer has a reputation 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.

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