What is the Meaning of Subrogation in Insurance?
Car Insurance

What is the Meaning of Subrogation in Insurance?

Accidents are quite stressful to deal with, especially if their occurrence is not your fault. Furthermore, there are times when the third–party that caused the accident tries to ignore the responsibility of their actions. This is where subrogation can come to the rescue. To help you gain a better understanding, we look at subrogation meaning in insurance.

Subrogation definition

Subrogation is the legal right that you give the insurance company to sue and claim compensation from the third–party that has caused the accident. The insurer can only pursue the third–party for the compensation after disbursing the claim amount to you, the first party.

Let’s understand this with an example. Suppose you get into an accident that is not your fault. When you ask the third–party to compensate you for the losses, they blatantly refuse to do so. Hence, you approach your comprehensive motor insurance provider for the compensation. After validating your insurance claim, the insurer will disburse your compensation from the own damage component of your comprehensive insurance policy. In exchange of the funds, you will have to transfer your rights of suing the third–party to your insurance company.

After disbursing the compensation to you, the insurer will take it upon themselves to take legal action against the third–party in order to get back the money they owe. Hence, you do have to deal with the third–party yourself. You can just take the compensation from your insurer and let them deal with the person that caused the accident.

What if someone is subrogating you?

If you have caused the accident, it is only fair to compensate the other person for the damages. However, if that is not feasible, you can ask them to waive their right of subrogation. If the first party agrees to do so, you will not be pursued by their insurer for the compensation. Here it is important to remember that the waiver of subrogation is chargeable by the insurer. Thus, you might have to pay these charges in order to avoid a lawsuit against you.

Things to know about subrogation in insurance

Now that we know subrogation meaning in insurance jargon, let’s look at a few things you need to keep in mind:

  • Subrogation is applicable on all indemnity insurance plans, such as health insurance plans, motor insurance plans, and property insurance plans among many others.

  • You can sue the third–party even after exercising your right to subrogation. However, due to your transfer of rights to the insurer, you will not be compensated for the same damages again.

  • Once you exercise your right of subrogation, you longer need to get involved in the matter. Your insurance company will resolve the issue directly with the third–party.

  • When your insurer sues the third–party, the lawsuit is fought by the insurance company of the third–party and not the third–party themselves.

  • The terms of the subrogation process may vary from one insurer to the other. However, a subrogation clause is mentioned in your insurance policy. This clause defines the different terms and conditions that are applicable for the subrogation process. Hence, it is better to read and understand the fine print of your insurance policy before making the purchase.

Disclaimer: The above information is indicative in nature. For more details on the risk factor, terms and conditions, please refer to the Sales Brochure and Policy Wordings carefully before concluding a sale.

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