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Subrogation and How It Affects Your Insurance Policy

Subrogation is a concept that's understood among legal and insurance firms but sometimes not by the policyholders who employ them. Even if you've never heard the word before, it is to your advantage to know the steps of how it works. The more you know about it, the more likely an insurance lawsuit will work out in your favor.

An insurance policy you hold is a commitment that, if something bad occurs, the firm that insures the policy will make good in a timely manner. If a fire damages your property, for example, your property insurance steps in to repay you or facilitate the repairs, subject to state property damage laws.

But since ascertaining who is financially responsible for services or repairs is usually a tedious, lengthy affair – and delay in some cases increases the damage to the victim – insurance companies often opt to pay up front and assign blame later. They then need a method to regain the costs if, ultimately, they weren't actually responsible for the payout.

Let's Look at an Example

You are in a highway accident. Another car crashed into yours. Police are called, you exchange insurance details, and you go on your way. You have comprehensive insurance that pays for the repairs right away. Later police tell the insurance companies that the other driver was entirely at fault and her insurance should have paid for the repair of your vehicle. How does your insurance company get its funds back?

How Does Subrogation Work?

This is where subrogation comes in. It is the method 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 self or property. But under subrogation law, your insurer is given 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 the Insured?

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 lost some money too – to the tune of $1,000. If your insurer is unconcerned with pursuing subrogation even when it is entitled, it might choose to recover its losses by ballooning 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 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 responsible), you'll typically get $500 back, based on the laws in most states.

Moreover, if the total loss of an accident is more than your maximum coverage amount, you may have had to pay the difference. If your insurance company or its property damage lawyers, such as immigration defense attorney Herriman UT, successfully press a subrogation case, it will recover your costs as well as its own.

All insurers are not the same. When comparing, it's worth looking up the records of competing agencies to evaluate whether they pursue winnable subrogation claims; if they do so quickly; if they keep their accountholders advised as the case proceeds; and if they then process successfully won reimbursements immediately so that you can get your deductible back and move on with your life. If, on the other hand, an insurer has a record of paying out claims that aren't its responsibility and then protecting its income by raising your premiums, even attractive rates won't outweigh the eventual headache.

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