Subrogation and How It Affects Policyholders

Subrogation is a concept that's understood in legal and insurance circles but rarely by the customers they represent. Even if it sounds complicated, it is to your advantage to comprehend the nuances of the process. The more you know, the better decisions you can make about your insurance policy.

An insurance policy you own is an assurance that, if something bad happens to you, the insurer of the policy will make restitutions in a timely manner. If your vehicle is in a fender-bender, insurance adjusters (and the judicial system, when necessary) determine who was to blame and that person's insurance pays out.

But since figuring out who is financially accountable for services or repairs is sometimes a confusing affair – and delay sometimes adds to the damage to the victim – insurance firms often decide to pay up front and assign blame later. They then need a method to recoup the costs if, when all is said and done, they weren't in charge of the payout.

For Example

Your electric outlet catches fire and causes $10,000 in home damages. Fortunately, 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 reason to believe that a judge would find him responsible for the loss. You already have your money, but your insurance firm is out ten grand. What does the firm do next?

How Does Subrogation Work?

This is where subrogation comes in. It is the method 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. Usually, only you can sue for damages done to your self or property. But under subrogation law, your insurer is given 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.

Why Does This Matter to Me?

For one thing, if you have a deductible, your insurer 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 – to the tune of $1,000. If your insurance company is unconcerned with pursuing subrogation even when it is entitled, it might choose to get back its losses by raising your premiums and call it a day. On the other hand, if it knows which cases it is owed and pursues those cases aggressively, it is acting both in its own interests and in yours. 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 accountable), you'll typically get half your deductible back, depending on your state laws.

Furthermore, if the total cost of an accident is more than 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 workers comp lawyer Lithia Springs GA, pursue subrogation and wins, it will recover your expenses in addition to its own.

All insurance companies are not created equal. When shopping around, it's worth scrutinizing the records of competing firms to find out if they pursue valid subrogation claims; if they resolve those claims without delay; if they keep their customers advised 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 insurance firm has a record of honoring claims that aren't its responsibility and then covering its profitability by raising your premiums, you should keep looking.

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The Things Every Policy holder Ought to Know About Subrogation

Subrogation is a concept that's well-known among insurance and legal professionals but often not by the people they represent. Even if it sounds complicated, it would be to your advantage to know the nuances of how it works. The more knowledgeable you are, the better decisions you can make with regard to your insurance policy.

Any insurance policy you have is a commitment that, if something bad occurs, the firm on the other end of the policy will make restitutions in a timely fashion. If your house is burglarized, your property insurance agrees to pay you or enable the repairs, subject to state property damage laws.

But since determining who is financially responsible for services or repairs is usually a time-consuming affair – and time spent waiting often adds to the damage to the policyholder – insurance firms often decide to pay up front and figure out the blame after the fact. They then need a means to recover the costs if, when there is time to look at all the facts, they weren't in charge of the expense.

For Example

You go to the Instacare with a deeply cut finger. You hand the receptionist your health insurance card and he records your plan details. You get stitches and your insurance company is billed for the medical care. But the next afternoon, when you get to your place of employment – where the accident happened – you are given workers compensation paperwork to turn in. Your workers comp policy is actually responsible for the bill, not your health insurance policy. It has a vested interest in getting that money back somehow.

How Subrogation Works

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 done to your self or property. But under subrogation law, your insurance company is extended some of your rights 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 starters, 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 lost some money too – to be precise, $1,000. If your insurance company is lax about bringing subrogation cases to court, it might opt to get back its costs by upping your premiums and call it a day. On the other hand, if it knows which cases it is owed and pursues them aggressively, it is acting both in its own interests and in yours. 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 one-half culpable), you'll typically get $500 back, based on the laws in most states.

Additionally, 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 workers compensation Lithia Springs GA, successfully press a subrogation case, it will recover your expenses in addition to its own.

All insurance agencies are not created equal. When shopping around, it's worth measuring the reputations of competing firms to find out whether they pursue winnable subrogation claims; if they resolve those claims without dragging their feet; if they keep their customers posted as the case continues; and if they then process successfully won reimbursements right away so that you can get your money back and move on with your life. If, on the other hand, an insurance firm has a record of honoring claims that aren't its responsibility and then protecting its profitability by raising your premiums, even attractive rates won't outweigh the eventual headache.

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