What is car insurance subrogation?


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Licensed Auto Insurance Agent
UPDATED: 2020-03-18T18:43:21.283Z
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A driver and his insurance agent at the scene of a minor car accident with a clip board looking at the car insurance agreement on car insurance subrogation.

If you’ve ever been in a car accident, you might have come across the term “subrogation” at some point during the settlement process. Even if you haven’t been in an accident, this information is helpful to prepare you. If you have insurance, this is an important concept to understand, because it can affect timely payment during the settlement process.

The meaning of subrogation

Subrogation is a legal term with origins in Latin. In Latin, “sub” means “in place of another,” and “rogare” means “to ask.” As a legal term, subrogation is when a third party “assumes another’s legal right to collect debt or damages.” Basically, it’s asking one party to act in place of another.

From an insurance perspective, this has a very practical application. For example, if you were to get into a car accident that is the fault of another party, subrogation would allow your insurance company to pay your claim and then pursue the other party’s insurance company to recover the costs.

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Subrogation and car insurance

The application of subrogation in auto insurance generally plays out something like this:

  • An insured person is in an accident that is the other party’s fault, such as getting hit when the other party fails to stop at a red light.
  • The insurance company of the person who was hit (the party that was not at fault), pays the claim.
  • That insurance company then sues the insurance company of the at-fault driver to recover the cost of the claim.

What has happened in the above example is that the insured person who was hit by the negligent driver subrogated their right to sue, transferring that right to their insurance company.

The benefit of this is that the claim was dealt with quickly, and the person who was hit doesn’t have to take on the work of suing the other insurance company to recover the cost of damages.

However, there are times when a person might wish to prevent their insurance company from suing another party on their behalf.

Waiver of subrogation

A waiver of subrogation is exactly what it sounds like. It’s an agreement that prevents your insurance company from suing the at-fault party for reimbursement.

Before we get into examples of when and how a waiver of subrogation might come up, it’s important to note that not all insurance companies will allow an insured to waive subrogation. Before signing anything, including a waiver of subrogation, be sure that you understand what your insurer permits.

Here are some situations in which a waiver of subrogation might be requested or considered:

  • An at-fault party might ask you to sign a waiver of subrogation and settle with you directly. Think carefully about this as it might not be in your best interests.
  • If you know the at-fault party and don’t want to risk the relationship if your insurer sues the party. For example, if your mother-in-law hit your car and is at fault, would you want your insurance company to sue her? It can be difficult to remove emotion from circumstances like this. Think carefully about the situation and the potential to cause a long-term rift in relationships. With subrogation, your insurance company doesn’t need your permission to sue the at-fault party to recover the costs of the claim. Unless there’s a waiver of subrogation, they have that right.
  • Notably, waivers of subrogation are more common on commercial auto policies because of the increased potential that an insurance company might end up suing one of a company’s clients, which is not good for business.
  • Municipalities sometimes will request a waiver of subrogation as a condition of using city property. If you are holding an event like a birthday party at a city park, read through your contract and terms of use carefully, as it might include a waiver of subrogation. If it does, consider calling your insurer to talk through the ramifications of signing such a contract. A municipality typically won’t budge on the inclusion of this, so it’s important that you understand what you are agreeing to when you accept a waiver of subrogation as a condition of using municipal property for your event.

Benefits of car insurance subrogation

It can be difficult to see what the benefits of subrogation are for you as an individual. After all, subrogation is mostly about your insurance company being able to recover some or all of what they’ve paid out in a claim.

The benefits of subrogation to an individual who is insured are twofold:

  1. Subrogation means that you’re likely to receive payment more quickly. If an insurance company is reasonably assured that they will be able to recover the funds that they’ve paid out by suing the at-fault party, they are more likely to pay your claim quickly.
  2. The ability to recover money means that the financial penalty will ultimately be paid by the at-fault party. This means the insurance company of the driver who was not at fault won’t have to absorb the cost of the claim, which keeps rates lower for their customers.

Clearsurance has car insurance resources available for you to use. You can visit the best car insurance page to see a live ranking of the best car insurance companies in your zip code according to consumers. While you’re there, you can click on any of the companies to find out more information and read consumer reviews.

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