You may have seen the term subrogation on your insurance policy, but what does it actually mean and how does it apply to your insurance?
Subrogation means that while the insurance company will reimburse you for any losses, they are not on the hook for damages that are not your fault. Therefore, if you are involved in a car accident, your auto insurer may help you pay for the damage to your car but pursue the at-fault party to recover the amount they paid out. The claim they file against the at-fault party’s insurance is called a subrogation claim. Through subrogation, your deductibles are usually recovered too.
What Is the Subrogation Process?
On your end, there is very little to the subrogation process. You simply file an insurance claim like you always would, and your insurance company will reimburse you for the cost minus deductibles.
Most of the subrogation process happens on the insurance company’s side. Your insurance company will file a subrogation claim with the other insurance company in order to recover the money they spent. This may involve negotiation.
Is Subrogation Beneficial?
Yes, subrogation is extremely beneficial in an insurance policy. Claiming on another person’s insurance policy can be a very slow process and leave you out of pocket or with medical and vehicle repair bills piling up. Subrogation allows your insurance company to pay for those expenses (minus deductibles) and then file a subrogation claim with the at-fault party’s insurance company. Therefore, subrogation helps you see compensation sooner and lets your insurance company do the legwork on your behalf. You will receive compensation for the deductibles you paid once your insurance company is compensated.
On top of the personal benefits of subrogation, insurance companies that practice subrogation are actually more successful. The money the insurance company recovers through subrogation are pure profit, meaning the company performs way higher than competitors who do not practice subrogation. A more successful and profitable insurance company means lower insurance premiums for you, the customer.
Subrogation With Disputed Fault
If there is shared fault or the at-fault party is clear, your insurance company may still practice subrogation. Your insurance company will still process your claim as usual and investigate the incident. They will file a subrogation claim with the other party’s insurance company and may recover all or some of the costs they paid. If they are able to recover some of the costs through subrogation, then you may receive some of your deductible back.
Whether subrogation occurs through shared fault or not will depend on the state laws for fault. Shared liability states will allow subrogation to occur if the person has only some fault in the accident.
Waivers of Subrogation
If you pursue legal action following an accident or you and the other party are negotiating a settlement, one of the conditions of settlement may be a waiver of subrogation. This means that you and the other party are coming to an agreement to cover your losses, and your insurance company cannot pursue a subrogation claim on your behalf on top of that settlement.
If you are pursuing legal action following an injury or accident, then you need to notify your insurance company of that fact. This will mean you may not be compensated as quickly as if you filed an insurance claim and your insurer pursued subrogation, but you will still receive compensation.