Understanding Subrogation in Car Insurance

Is your insurance provider considering subrogation? Here's how it can allow for a reliable claims process.

Laura Leavitt | 

Oct 5, 2022 | 4 min read

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Car insurance companies work under the principle that, when possible, the person who causes an auto accident and their insurance should pay for the accident's resulting costs. One of the ways this is accomplished is through a legal process called subrogation. This right helps your car insurance company pursue damages in your place, saving you time and logistical hurdles.

If you're in the thick of an insurance claim for an accident where you weren't at fault, this term may have come up. Let's take a closer look at how it works and your role in the process.

What Is Subrogation in Car Insurance?

Subrogation is a legal right to pursue the at-fault driver and/or their insurer for the costs related to a claim. It may not be necessary if the at-fault driver's insurer pays for all relevant costs immediately, but the right to pursue those damages gives your insurer more leverage. They use this leverage to protect you and keep costs down for their company, since they could otherwise end up paying out even when a low-risk, low-premium driver is involved in an accident.

For example, let's say someone hits your car and the other driver is determined to be at fault 100%. You work with your insurer and their insurer to file the claim, and depending on the situation, your insurer may cover some costs to get the ball moving on repairs or additional expenses, like getting a rental car. However, the other driver's insurer is ultimately responsible, so your insurer may use subrogation to recover the funds from the other driver's insurer. Depending on the damages and other factors involved, you may also get your own deductible back.

How Does Subrogation Save You Money?

If your insurance company has to pay for repairs that were caused by another at-fault driver, that increases their costs in a system that is designed to reward drivers who cause fewer accidents with better car insurance rates. Insurers need the ability to legally pursue the funds required to fix your car and pay for medical expenses if they want to keep costs down for their drivers who are not causing accidents. If you are a driver who generally drives carefully and isn't at fault in accidents, subrogation helps your car insurer keep your rates reasonable, even if someone else causes you to submit a claim.

Do I Have to Do Something About Subrogation?

Generally, you will not participate in subrogation, and because insurers communicate frequently about claims, it can be a good idea to let them sort it out. You can ask your insurer about timelines for your particular case, such as whether your claim will be paid out at a certain time, regardless of whether the other insurer has paid yet. However, this will vary from insurer to insurer and from case to case.

One case where you might get involved is if you disagree with the claim payout from the at-fault insurer. An option in some states and with some forms of coverage is to file a claim through your own collision or comprehensive insurance and let the insurance company use subrogation to get more than was originally paid out.

Be aware, however, that subrogation isn't available in all states or for all kinds of insurance claims, and the rules do vary, so there's still a chance that you won't be able to get your insurance deductible back, or any additional payment.

What If I'm Asked to Waive Subrogation?

Particularly in the case of an at-fault driver who is underinsured or wants to settle with you directly to avoid working with insurers, you may be asked to sign a document called a waiver of subrogation. It essentially takes the right to pursue the damages away, reducing your insurer's options for handling the situation. You can talk to your insurance agent before committing to signing this document. There may be times when they wouldn't use subrogation anyway, so this could be fine. However, in other cases you may be removing some valuable leverage.

Understanding Your Car Insurance Demystifies the Process

While the ins and outs of insurance may be primarily for your insurance representative to handle, knowing a little about the process can give you context if there's a delay, and it's also part of being a wise car owner. As an at-fault driver or a not-at-fault driver, you want all information available to help you get an idea of how the claim process will go. By getting to know subrogation, you can understand how far along a claim is in the process, and how it may impact you personally.

Laura Leavitt

I love a good spreadsheet and will happily calculate compound interest all day, but my biggest focus is helping people achieve their financial goals. That could be saving up for a dream car or calculating the right car payment for your budget so you can get a reliable daily driver. I research and write about personal finance so that making great financial choices becomes easier for us all.