What Is Insurance Subrogation and How Does It Work?

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Car accident (Photo: @achirathep via Twenty20)
You’re driving one day and come to a green light. Driving through the intersection, you are hit by another driver, totaling your car. If you have insurance, your insurance company will pay for your injuries, as well as to replace your car. But your insurance company does not stop there.
Next, your insurance company approaches the other driver and demands that they reimburse them for the money they paid out. The insurance company for the other driver either pays your insurance company back or the claim is taken to court. This is called subrogation and it’s a normal part of how car insurance works.
If you find that you are in subrogation or are simply interested in how it works, here’s what you should know.

How Does Insurance Subrogation Work?

In some accidents, such as a rear-end collision, fault is pretty much a given. The driver who hit the other driver is at fault, and their insurance is the one that pays for any damage to the other party. This includes medical costs and to repair any damage to the other vehicles.
But, sometimes, it’s not initially clear who is at fault in an accident. In these cases, your insurance company will go ahead and pay for your medical bills and property damage. Then once it’s determined that you’re not at fault, your insurance company will go after the responsible party to recover what the company paid to cover your medical and property damage repair bills. This subrogation, or standing in, is designed to make the whole settlement process go more smoothly.
Your policy probably contains language dealing with subrogation, which gives your insurance company the right to seek the recovery of funds from a third party if the third party is at fault. Usually, this recovery of funds is handled between insurance companies. But if the at-fault driver doesn’t have insurance, your insurance company will have to take the driver to court.

How Long Does Subrogation Take?

The length of time that it takes for subrogation depends on the complexity of the accident and whether it’s clear or not who was at fault. The process is further complicated if multiple drivers can be deemed at fault. Usually, the drivers involved in the accident don’t have to worry about subrogation because it’s typically handled between each driver’s insurance companies.
Of course, each driver involved in the accident will have to pay their deductible before receiving any kind of payment for damages from their insurance company. On average, it will take around six months for you to recover your deductible if you were not at-fault in a claim that has gone into subrogation.

What Should You Do if You Have a Subrogation Claim Brought Against You?

If you have insurance, then there’s not much that you need to do if a claim against you goes into subrogation. Your claim should be fully covered, up to your policy limits. However, you will probably see an increase in your insurance premium following a car accident. In many cases, all you will hear about the subrogation is a written notice from your insurer letting you know that payment was made to the other party.
If you do not have insurance, then the process gets more complicated. In addition to facing stiff penalties, fines, and possible jail time, you will also have to defend the subrogation in court. Of course, you can hire an attorney to handle this for you.
If you lose the case, then you will have to pay the damages as presented by the insurance company for the other driver. If you do not, then the insurance company will probably just send the subrogation to a collections company who will handle it from there. The insurance company also could get a lien on any property you own or garnish what you owe them from your paycheck or bank account. This is why it’s so important to have insurance.