Insurance can be a lifesaver in times of unexpected events, but have you ever heard of insurance subrogation? It is important to grasp, as it can affect your insurance claims.
It may sound complex, but it is quite straightforward. Imagine you are in a car accident, and it is not your fault. Your insurance company pays for the repairs to your vehicle. Now, they have the right to pursue the at-fault driver or their insurance company to recover the money they have paid on your behalf. This process is insurance subrogation in action.
Why does a waiver of subrogation matter?
When you sign a waiver of subrogation, it means you, as the insurer, ask your insurance company not to recover damages from a third party. It ensures you do not receive double compensation for your loss. It can also help expedite the claims process by not going through lengthy litigation.
Just note that this may mean paying a higher premium since you may be putting your insurer at higher risk. However, there are times when insurance companies choose to waive subrogation. What does this mean, and why would they do it?
Reasons for waiving subrogation
Below are the common reasons why insurance companies may waive subrogation:
- Customer retention: Insurance companies value their customers. By waiving subrogation, they may be showing goodwill to retain your business. This customer-centric approach can help maintain long-term relationships.
- Small claims: Insurance companies may waive the cost of pursuing subrogation for minor claims where the cost of pursuing subrogation exceeds the potential recovery. It’s simply not cost-effective to go after small amounts.
- Faster settlements: Pursuing subrogation can be a lengthy process involving legal procedures. By waiving subrogation, insurance companies can expedite the claims settlement. This means you can get compensation quickly.
- Policy terms: Some insurance policies have clauses that allow the insurance company to waive subrogation under specific circumstances.
- Mitigating conflict: Subrogation can sometimes lead to disputes between insurance companies and third parties. To avoid potential conflicts or legal battles, insurers may choose to waive subrogation and focus on serving their policyholders.
Insurance companies waive subrogation for various reasons, so be sure to read your insurance policy carefully to make an informed decision on whether you need to sign a waiver of subrogation or not. It might help to check with legal counsel to understand its consequences. But ultimately, this decision aims to provide you with a smoother claims experience and maintain positive insurer-policyholder relationships.