What is Subrogation in Insurance Terms?

There are a lot of things in your insurance policy, specifically auto insurance, that you may not know are there that could affect you directly. Depending on certain conditions and exclusions your auto insurance may or may not pay a specific claim, but your policy will go even further than that. Did you know that in your insurance policy you give your insurance company the right to recover any funds paid for which you are not responsible? It is called subrogation and here is a little about it.

According to the AICPCU (American Institute for Chartered Property Casualty Underwriters) "subrogation" is as follows: "The process by which an insurer can, after it has paid a loss under the policy, recover the amount paid from any party (other than the insured) who caused the loss or is otherwise legally liable for the loss." In other words, if you go through your policy to get benefits paid to you by your insurance you forego the right to sue the other party and give your insurance company the right to recover.

What will happen next is that your insurance company will try to settle things amicably between insurance companies. If the other party is insured your insurance company will communicate with their insurance company and request repayment. If the other insurance company does not dispute the decision they will repay in time (not quickly) and all will be settled. If the accident or amount of money is disputed it will be taken to an arbitration panel to be decided.

If the other party does not have insurance your insurance company will communicate with the other party directly to try to recover. It will all start on nice terms asking the other party to pay as they are legally liable for the damages or injuries. Disputing this or lack of response will cause your insurance company to turn the claim over to a collection agency to recover the funds. Nobody wants to deal with collection agencies as credit comes in to play and many claims are settled at this point.

When your insurance company settles with and recovers from another party they will also take in to account what you have paid, if any. For instance, any deductible you paid will be included in the amount demanded for repayment, when this amount is repaid to the insurance it will also be repaid to you. Your insurance company is there to protect you and your assets and they will do everything possible to get your money, and theirs, returned.