What is 'Subrogation'

Subrogation is a term denoting a legal right reserved by most insurance carriers. Subrogation is the right for an insurer to legally pursue a third party that caused an insurance loss to the insured. This is done as a means of recovering the amount of the claim paid by the insurance carrier to the insured for the loss.

BREAKING DOWN 'Subrogation'

Subrogation literally refers to the act of one person or party standing in the place of another person or party. Subrogation in the insurance sector, especially among auto insurance policies, occurs when the insurance carrier takes on the financial burden of the insured as the result of an injury or accident payment and seeks repayment from the at-fault party.

One example of subrogation is when an insured driver's car is totaled through the fault of another driver. The insurance carrier reimburses the covered driver under the terms of the policy, and then pursues legal action against the driver at fault. If the carrier is successful, it must divide the amount recovered after expenses proportionately with the insured to repay any deductible paid by the insured.

Subrogation is not only relegated to auto insurers and auto policyholders. Another possibility of subrogation occurs within the health care sector. If, for another example, a health insurance policyholder is injured in an accident and the insurer pays $20,000 to cover the medical bills, that same health insurance company is allowed to collect $20,000 from the at-fault party to reconcile the payment.

Subrogation Process for the Insured

Luckily for policyholders, the subrogation process is very passive for the victim of an accident from the fault of another party. The subrogation process is meant to protect insured parties; the insurance companies of the two parties involved work to mediate and legally come to a conclusion over payment. Policyholders are simply covered by their insurance company and can act accordingly. It benefits the insured in that the at-fault party must make a payment during subrogation to the insurer, which helps keep the policyholder's insurance rates low.

However, in the case of an accident, it is still important to stay in communication with the insurance company. Make sure all accidents are reported to the insurer in a timely manner and let the insurer know if there should be any settlement or legal action. If a settlement occurs outside of the normal subrogation process between the two parties in a court of law, it is often legally impossible for the insurer to pursue subrogation against the at-fault party. This is due to the fact most settlements include a waiver of subrogation.

RELATED TERMS
  1. Conventional Subrogation

    The relationship between the insured and insurer as defined in ...
  2. Waiver Of Subrogation

    A special type of endorsement on a property-casualty insurance ...
  3. Equitable Subrogation

    A legal doctrine that allows a party that has made payments on ...
  4. Personal Lines Insurance

    Property and casualty insurance products for individuals that ...
  5. Insurance Premium

    The amount of money that an individual or business must pay for ...
  6. Cooperation Clause

    An insurance contract clause that requires the policyholder to ...
Related Articles
  1. Insurance

    How to Use a Waiver of Subrogation

    A waiver of subrogation means that a party to a contract waives the right to allow someone (usually an insurance company) to sue the other party to the contract in case of a loss.
  2. Insurance

    Understanding Your Insurance Contract

    Learn how to read one of the most important documents you own.
  3. Insurance

    Understanding Insurance Claims

    An insurance claim is a formal request made to an insurance company that asks for a payment based on the terms of the policy.
  4. Insurance

    Bundle Your Insurance For Big Savings

    Bundling your insurance can save you money and time. Read on to see how get the most out of multiline insurance discounts.
  5. Insurance

    Do You Need Casualty Insurance?

    Find out how different types of coverages can protect you and which policy is right for you.
  6. Insurance

    Exploring Advanced Insurance Contract Fundamentals

    Understanding your contract can help you protect our family's financial security.
  7. Insurance

    What Happens If Your Insurance Company Goes Bankrupt?

    When insurance companies go bankrupt or face financial difficulty, it's bad news for policy holders.
  8. Insurance

    Explaining Insurance

    Insurance is a form of contract between an individual and an insurance company that spreads risk in exchange for premium payments.
  9. Insurance

    How to Protect Your Income No Matter What

    What does it mean to insure your income? Here are a variety of ways to do it and some insights into when it might make sense to invest in income insurance.
  10. Insurance

    The History Of Insurance In America

    Insurance was a latecomer to the American landscape, largely due to the country's unknown risks.
RELATED FAQS
  1. Do contractors require subrogation clauses for their contract workers?

    Discover if general contractors require subrogation clauses when hiring contract workers and what form documents are most ... Read Answer >>
  2. Can you sue an insurance company for not paying a claim over a waiver of subrogation ...

    Learn more about insurance and why waivers of subrogation are common with property insurance. Find out about liability risk ... Read Answer >>
  3. Is a waiver of subrogation clause better for a tenant or a landlord?

    Find out why a waiver of subrogation clause is important to include in a lease agreement, and understand how it affects landlords ... Read Answer >>
  4. What is the average return on total revenue for the insurance sector?

    Learn about the three main segments of the insurance industry, and find out what the average return on revenues is for the ... Read Answer >>
  5. Can your insurance company cancel your policy without notice?

    Learn about your rights as an insured when it comes to your insurance policy being canceled, including how to access your ... Read Answer >>
  6. How does the insurance sector work?

    Learn more about the insurance sector, a historically safe place for equity investors and the home of some of the largest ... Read Answer >>
Hot Definitions
  1. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  2. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  3. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  4. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  5. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  6. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
Trading Center