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If you get into a car accident that isn't your fault, and your auto insurer has to cover the claim, they might seek reimbursement from the at-fault party's insurance company—a process known as subrogation. The rules around subrogation vary by state, and insurance companies aren't required to pursue it. But if they do, it could help you recover some or all of your deductible. Here's how it works.
What Is Subrogation?
Subrogation is when your insurance company attempts to get reimbursed for an insurance claim they paid out to you when the other driver is at fault. Doing so can help insurance companies recover certain financial losses.
If you're involved in an accident and file a claim that gets approved, your insurer should issue a check to cover some or all of the damage. The amount they pay will depend on your coverage, and your deductible amount will be subtracted from the payout. This is the amount you're responsible for paying toward a claim before your insurer kicks in their share.
But your insurance company might initiate a subrogation if the other driver was at fault. This involves contacting the at-fault party's insurance company to seek some level of reimbursement. If they're successful, you might get back some or all of your deductible.
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How Does the Subrogation Process Work?
Let's show how subrogation works with a quick example. Here's how things could unfold if someone runs a red light and hits your vehicle.
- Your insurer will likely pay the claim themselves. After you file a claim, the other driver's insurance company should put money toward your repairs and medical bills. But if they're slow to pay, your insurer may intervene to cover those costs. That's good for you as the policyholder, though your deductible will be subtracted from the payout you receive.
- Your insurance company will work in the background to kickstart subrogation. This is relatively hands-off for the policyholder. There's nothing you need to do to initiate or manage the process. However, you should receive notification from your insurer that they're pursuing subrogation.
- If they're successful, your insurer is required to refund your deductible. If all goes as planned, your insurance company will recoup its losses and return the deductible you paid earlier.
Just be aware that subrogation laws vary from state to state, which could affect your insurer's ability to recover their losses. For example, states have varying time limits on when insurance companies can make a subrogation claim. And some have certain requirements to escalate a personal injury case to litigation.
Also remember that insurers can only seek subrogation in instances where another party was at fault. That means it won't be an option if your car is damaged in a weather event or stolen by someone who eludes the authorities.
How Long Does Subrogation Take?
From start to finish, the subrogation process can take anywhere from several weeks to a year or more. The timeline will depend largely on your state's laws and the complexity of the claim.
For example, if there's a disagreement over who's at fault, your insurer may need to pursue arbitration or litigation to get things resolved. These legal processes can take time. In some cases, your insurer might decide that pursuing subrogation simply isn't worth it. That might happen if an accident is caused by an uninsured driver who doesn't have the means to pay.
Benefits of Subrogation
Is subrogation good? Here are some of the main advantages of a successful subrogation:
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What Is a Waiver of Subrogation?
In some instances, the policyholder might decide to settle things with the at-fault driver themselves. Signing a waiver of subrogation effectively takes the insurance company out of the equation. If you decide to go this route, be sure to read the agreement carefully. It's also wise to run things by your insurer first. Signing a waiver of subrogation could violate your contract with your insurance company.
The Bottom Line
Subrogation can be a good thing if you're involved in an accident that's caused by someone else. If all goes well, your insurance company could recover your deductible—which would put some cash back in your pocket. Another perk is that the process is handled entirely by your insurer. Whether they decide to pursue subrogation is ultimately up to them.