Why subrogation happens?

Subrogation (sometimes shortened to "subro") sounds tricky and serious, but it's actually just a way to protect you and your insurance company from paying for an accident that wasn't your fault.

Say you got into an accident with a reckless driver and it's been officially determined that you weren't to blame. You call your insurer, report the accident, and file a claim.

Typically, the at-fault driver's insurer would take care of the repair costs and any medical bills, but for one reason or another, it's delayed. So your own insurance steps in to help pay for repairs and other bills and — just like that — you're back on the road.

Meanwhile, you had to shell out a deductible and your insurer had to pay for an accident that it wasn't liable for. Not fair, right?

This is where subrogation enters the picture. Subrogation allows your insurance company to recoup the accident costs (medical payments, repairs, etc.), including your deductible, from the at-fault driver's insurer.

Long story short, successful subrogation = refund for you and your insurer. Not only does it help keep you and your insurer from paying for an accident you didn't cause, it also helps keep your rates low — because when your insurance company saves, it can pass the savings on to you.

If fault isn't cut and dried

Determining fault is sometimes black and white, but often it's much more complex. For instance, let's say it's determined that you aren't completely at fault. So, depending on your state, you may not be fully responsible for paying your own repair costs.

In this case, you might decide to file a claim with your own insurer, pay your deductible, and let your insurer take care of the rest. But since you're not entirely at fault here, your insurance company could choose to subrogate the other party's insurer to recover all (or some) of the accident costs, and you might get all (or some) of your deductible back.

Of course, this is only a hypothetical scenario. In real life, how much you might recoup depends on the laws in each state. Check with your insurer to learn more.

The subrogation process

Here's the good news: during subrogation, you, the policyholder, don't have to do a whole lot. Subrogation generally happens behind the scenes, with 2 insurance companies determining who pays for what. Not very exciting, but that's what we're here for.

To help things run smoothly, just keep your insurance company in the loop. Always report any accidents, and talk to your insurance experts if you plan on taking any legal action or agreeing to a settlement (especially if it involves a waiver of subrogation).

What is a waiver of subrogation?

A waiver of subrogation is essentially an agreement that prevents your insurance company from acting on your behalf to recoup expenses from the at-fault party.

Generally, a waiver of subro comes into play when the at-fault driver wants to settle the accident — but with your insurer out of the picture. Make sure you fully understand this type of waiver before you sign.

Once a waiver is signed, your insurance company won't be able to go to bat for you if something goes wrong, since you've waived its right to step into your shoes, legally speaking.

To help you make the most informed decision, most insurance companies ask that you notify them before signing a waiver of subrogation.