Subrogation is the term to describe negotiations between two parties. This process allows an insurance company to legally act as the policyholder while negotiating with a third party. For instance, let’s say someone hits your car and you need to make a claim. Your insurance company and the insurance of the other party would go through subrogation to discuss the terms of claim. This is how you would get coverage for your vehicle if you lived in an At-Fault state.
The definition of subrogation refers to someone or a party stepping in place of another person. Therefore, this process isn’t necessarily about negotiation, but that they can legally act on your behalf. You’ve probably heard the saying “let’s just leave it up to the insurance companies,” shortly after getting into an accident. This prevents either party saying or doing something that could potentially make them liable for the accident. After an accident, anything you say and do can be used against you. So even when it’s not your fault, saying something as simple as “I should’ve paid more attention,” makes you liable.
Subrogation is most commonly used in car insurance claims. But, subrogation can also be used to negotiate policies for business, worker’s compensation, health, and even home insurance.
Upsides to Subrogation
Subrogation makes the insurance claims process much more stream-lined and smoothly. Most claims will be paid by the policyholder’s insurance provider right away. Subrogation seeks to reclaim those loses if the other party is the one at-fault. Policyholders are covered regardless under their own insurance policy.
If the insurance provider successfully negotiates the terms with the other party, the expenses are divided to repay the insurance provider’s deductible amount. The policyholder, however, truly has nothing to worry about in this process unless the provider is unsuccessful with their negotiations.
This can be especially important if the accident or claim has substantial and life-altering consequences. Granting your insurance provider the ability to fight on your behalf, especially in cases that aren’t your fault, can ensure you get all the coverage you need.
What’s a Subrogation Waiver?
A subrogation waiver waives the right for an insurance provider to go through subrogation. Insurance providers will charge a fee for this, or will include a clause regarding the terms of this. This means that your insurance company can no longer sue any third party on your behalf to recover lost damages.
This also means that policyholders are less protected than with subrogation. Your insurance provider can no longer seek damages upon your behalf if there’s an accident you’re not-at-fault for. This can be especially dangerous if you or a passenger are severely hurt, or the crash is fatal.
There are two types of subrogation waivers that you would sign:
There are two basic types of waiver endorsements used on liability policies:
- A scheduled endorsement prevents your insurer from suing any party listed on your endorsement. This waives your right to any subrogation.
- A blanket endorsement has more coverage, as it provides a general description of the parties it would sue and not sue.
