Subrogation

Subrogation lets your insurer step into your shoes. After it pays you for a covered loss that someone else caused, it can go after that party, or that party’s insurer, to get its money back. You get paid without waiting for a fight over fault, and the cost ends up with whoever was responsible.

How it works

1. A covered loss happens, and someone else caused it.
2. Your insurer pays your claim, minus your deductibleDeductibleA deductible is the amount you pay toward a covered loss before your insurance pays, usually subtracted from the claim payment.Read the definition.
3. The insurer takes over your right to recover from the at-fault party, up to what it paid.
4. If it recovers money, you may get some or all of your deductible back, depending on the policy and your state’s law.

Subrogation is most common with first-party coverageFirst-party coverageFirst-party coverage pays for losses your own business suffers, like damage to your property or lost income, rather than claims other people make against you.Read the definition like commercial property, and with workers’ comp when someone outside your business caused an employee’s injury.

Your part

Most policies include a condition that you won’t do anything after a loss to harm the insurer’s right to recover. In practice, don’t settle with, or sign a release for, the party who caused the damage without talking to your insurer first. Keep the evidence, like the failed part, photos and repair records.

Before a loss, a contract can ask you to give up these rights in a waiver of subrogationWaiver of subrogationA waiver of subrogation is an agreement, usually added to your policy by endorsement, that stops your insurer from recovering claim payments from a specific client, landlord or contractor.Read the definition. Many policies allow that when it’s agreed in writing before the loss, and some require an endorsement.

An example