Subrogation refers to the firm taking place of their policyholder to pursue a settlement before or after they pay claims. Through this act, the insurance company helps move through legal processes more smoothly than if the individual went directly to the other insurance company or a third-party organization.
Normally, the policyholder is paid for their losses directly from their insurance company. This usually takes place after the individual has paid the deductible or a percentage of coinsurance. For instance, when dealing with auto accident repairs, the policyholder might have to pay a $500 deductible for the insurance company to pay the rest.
Once this is done, the firm will seek reimbursement from one of two places. It will either be the insurance company of the other party or if they were uninsured, the individual that caused the issue. This is in the form of a subrogation claim.
The reason for subrogation is to minimize the impact on the policyholder. After a vehicle accident or a work-related illness, these individuals tend not to have the energy to pursue payments from another insurance firm or an individual. Thus, they pay the insurance company to handle settlements in their place. Usually, agreements are quickly made between the two parties. In some situations, the insurance company will utilize subrogation in court proceedings.
Though the process is nearly invisible to the policyholder, they still need to provide the necessary information for their insurance firm to become their subrogate. In the case of a vehicle accident, they must report it to the insurer as soon as possible. Waiting for an extended period will cause delays and possible rejection of the claim.
The policyholder also needs to let their insurance company know if there were injuries to themselves or anyone else involved in the accident. This notification also needs to include data on where they received treatment and what medication they were prescribed. If the injuries were serious enough to merit hospital stays or physical therapy, the insurer needs to know about these as well so they can act as a proper subrogate.
There are some situations where a policyholder doesn’t want their insurance firm to act on their behalf. Should this be the case, they need to sign a waiver of subrogation. This halts the insurer from putting themselves in place of the insured to recoup losses.
There are two potential downsides to this type of waiver. First, the policyholder might have to pay an additional fee to the insurance company. Second, the insurer is exposed to greater risk — not only for recouping their losses but to mitigate potential costs if they are the party that caused the issues.