Sub-ro… what? Is this some kind of legal mumbo-jumbo? Well, subrogation is legal jargon (derived, of course, from Latin), but is also a term that every motorist should be familiar with. Whether you agree to subrogation or not could have profound affect on your car insurance company’s ability to reach a settlement in case you get into an accident.
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What Is Subrogation?
Subrogation is the process in which an insurance company seeks reimbursement from a person or legal entity responsible for an accident. What this means is that if you get into an accident and the other party is at-fault, the auto insurance company can act on your behalf and seek compensation for damages. This usually occurs after the insurance company has paid your claim to you.
For example, let’s say you get into a collision and the other party is at-fault. Your car is totaled and you suffer some physical injuries that require treatment. Your auto insurance company pays for the damages to your vehicle and your medical bills. Since you have subrogated your rights to the insurance company, they settle with the other party’s insurer and are compensated for the money that they paid to you. Included in this amount is your deductible, which your car insurance company refunds to you.
Subrogation can include amounts for property loss, medical bills, lost wages, pain and suffering, deductible amounts, etc. It is also interesting to note that your auto insurance company can subrogate against other forms of insurance you may possess. For instance, if there are medical bills that can be covered under your health insurance policy, your car insurer can subrogate against your health insurer. Strange, but true.
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What If You Are At-Fault In An Accident?
In this case, the other party’s car insurance company can subrogate and seek compensation from you. They will contact your car insurance company and will settle with your insurer. You will not be involved in the process (other than paying a deductible and possibly seeing your rates increase). If you don’t have car insurance, then it is probably time to get a lawyer. By driving without insurance, you were breaking the law and could be sued.
How Do I Know If I Have Subrogated My Rights To My Car Insurance Company?
Subrogation is standard practice in the auto insurance industry. If you do get into a collision, most likely you will have to sign a release that subrogates your legal rights to the car insurance company. Most policyholders aren’t too concerned with subrogation, as it occurs after their car has been fixed/bills paid. It is the last step in the claim process. However, subrogation is important because it is what helps keep auto insurance rates down for us all.
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