What is Subrogation?
Subrogation is a process in insurance where an insurance company steps into the insured’s shoes after a claim has been paid. It allows the insurer to recover the claim amount from the party responsible for causing the loss. This legal right enables the insurance company to seek compensation from a third party who may have been negligent or at fault for the damages.
In property and auto insurance, subrogation often occurs after incidents like car accidents or property damage. For example, if your car is damaged by another driver, your insurance company might cover the cost of repairs and then later pursue the at-fault driver’s insurance for reimbursement. This helps to ensure that the financial burden is shifted to the responsible party rather than falling on the policyholder or their insurer.
Subrogation also protects insurance companies by allowing them to recoup costs, which can help keep premiums lower for their policyholders. Without subrogation, insurance companies would have to absorb the costs of all claims, potentially driving up insurance rates for everyone.
In practice, subrogation often occurs behind the scenes, with policyholders experiencing little disruption. However, in some cases, the insured may need to assist their insurer in pursuing the third party.