A Primer in Subrogation

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Natasha McLachlan is a writer who currently lives in Southern California. She is an alumna of California College of the Arts, where she obtained her B.A. in Writing and Literature. Her current work revolves around insurance guides and informational articles. She truly enjoys helping others learn more about everyday, practical matters through her work.

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Laura Walker graduated college with a BS in Criminal Justice with a minor in Political Science. She married her husband and began working in the family insurance business in 2005. She became a licensed agent and wrote P&C business focusing on personal lines insurance for 10 years. Laura serviced existing business and wrote new business. She now uses her insurance background to help educate...

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Reviewed by Laura Walker
Former Licensed Agent

UPDATED: Sep 24, 2020

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There are a lot of technical legal and insurance terms that are confusing. Subrogation is one such term. Subrogation is s a common practice for insurance companies; it is a practice which has very limited use in other fields. So what is subrogation? In essence, subrogation is the act of an individual or agency exercising the rights of a client in an attempt to recover lost funds. If you have ever filed an auto insurance claim against another driver, and your insurance company settled the claim; that was subrogation in action.

When an insurance company is successful in a case like this, they keep all the money that is collected to offset the payments that were made to you. Once they reach that limit, any money over and above that is distributed to you. Sometimes companies will charge a small fee for the act of collecting these fees on your behalf. Check the details of your policy, or ask your insurance agent about the details of how they work through this process.

For you, the policyholder, the whole process of subrogation, can seem to be transparent. Your insurance company is probably very familiar with the process. They do the behind the scenes work that you don’t see. They will pay out a claim against another insurance company, and secure their means to collect the money at a later time, this gets the claim into an acceptable state of due management. While all this is going on, the policyholder is probably unaware of all these moves that have been taking place, which is as it should be.

When you sign your insurance policy, you are basically giving your insurance company permission to enact subrogation on your behalf for these types of situations. As we covered earlier, for the most part policyholders are not even aware of all the things that are going on in regard to subrogation. The main thing for most of us is that we get paid on the claim, which is exactly what happens. Leave the details to your insurance company; they know what they are doing when it comes to subrogation.

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