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What if someone who doesn’t have insurance hits you?

What Is Subrogation?

Based on A Post by Allison Ruuska on 12/10/2007 at 1:00 PM

What happens after your insurance company pays for a loss that’s not your fault?

Using your own auto insurance for a claim that’s not your fault can leave you feeling a bit frustrated, but sometimes that’s your best option to resolve a claim quicker so you can return to your normal life. If you’ve been in this situation, then you’ve probably heard of subrogation.

Believe it or not, your claim doesn’t end once repairs are complete and the bills are paid. If you had to use your insurance for a claim for which you weren’t at fault, you and your insurance company are still entitled to receive the money paid on the claim. The process to recover that money is called subrogation.

When Does Subrogation Occur?

When your insurance company covers a loss that’s not your fault, they may pursue the at-fault party to recover payments made for your damages and injuries. Insurance companies can only subrogate other parties if their customer is not at fault for an accident.

For instance, let’s say Joe rear-ends your car but he doesn’t have insurance or his insurance company is taking too long to get back to you. Your car isn’t drivable, and you don’t want to keep asking friends to chauffeur you around town, so you decide to use your own insurance (from Progressive, coincidentally) to repair your car. You pay your $500 Collision deductible, fix your car, and are back to normal in a couple of weeks.

However, you still paid $500 out of pocket and your insurance company paid thousands of dollars for an accident that wasn’t your fault. In situations like this, your insurance company will subrogate Joe or his insurance company to recover the money paid for the accident – and that includes attempting to recover your $500 deductible for you.

Why Subrogation Is Important

Subrogation is a very important last step in the claims resolution process — and an important aspect of insurance. The successful recovery of money paid on claims allows companies to pass the savings to you, in turn helping to keep your insurance rates down.