Subrogation and How It Affects Policyholders

Subrogation is a term that's well-known among legal and insurance firms but sometimes not by the policyholders who employ them. Even if it sounds complicated, it is in your self-interest to understand an overview of the process. The more you know, the better decisions you can make with regard to your insurance company.

Any insurance policy you have is a promise that, if something bad happens to you, the firm that insures the policy will make restitutions in one way or another without unreasonable delay. If your real estate burns down, for instance, your property insurance steps in to repay you or pay for the repairs, subject to state property damage laws.

But since ascertaining who is financially responsible for services or repairs is regularly a time-consuming affair – and time spent waiting often compounds the damage to the victim – insurance firms usually decide to pay up front and figure out the blame later. They then need a means to recoup the costs if, when all is said and done, they weren't actually responsible for the expense.

Can You Give an Example?

Your electric outlet catches fire and causes $10,000 in home damages. Happily, you have property insurance and it takes care of the repair expenses. However, the insurance investigator discovers that an electrician had installed some faulty wiring, and there is a reasonable possibility that a judge would find him accountable for the loss. The home has already been repaired 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 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. Normally, only you can sue for damages to your person or property. But under subrogation law, your insurance company is extended some of your rights in exchange for having taken care of the damages. It can go after the money that was originally due to you, because it has covered the amount already.

Why Do I Need to Know This?

For one thing, if your insurance policy stipulated a deductible, your insurance company wasn't the only one that 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 insurer is unconcerned with pursuing subrogation even when it is entitled, it might opt to get back its expenses by increasing your premiums. On the other hand, if it knows which cases it is owed and goes after them aggressively, it is acting both in its own interests and in yours. 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 one-half to blame), you'll typically get half your deductible back, depending on the laws in your state.

Moreover, if the total cost 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 social security disability lawyers paddock lake wi, successfully press a subrogation case, it will recover your losses in addition to its own.

All insurance companies are not the same. When shopping around, it's worth weighing the records of competing companies to find out if they pursue winnable subrogation claims; if they resolve those claims without dragging their feet; if they keep their clients 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 honoring claims that aren't its responsibility and then safeguarding its profit margin by raising your premiums, even attractive rates won't outweigh the eventual headache.

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