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The substitution of whom makes an insurance claim and/or the right to transfer an insurance claim to another other party.


The textbook definition for Subrogation is one individual or party who stands in for another individual or party. In the world of insurance, Subrogation is when a carrier of insurance accepts financial responsibility for another insured individual due to a accident or damage done to the individual seeking restitution. This act is generally used in auto insurance policies although it can be used in other sectors of insurance.

Example of Subrogation

A simple example of how subrogation can take place is if an individual’s vehicle is totaled in an accident that is the other drivers fault. The insurance company would cover the driver who was hit per the policy agreement, and would subsequently take legal action against the driver who is at fault for the damage. If the carrier of insurance is successful in legal action, they are then required to split the amount of money that is awarded evenly with the insured to repay any deductible that is paid for by the insured party.

Although auto insurance is where subrogation typically takes place, it is not limited to this sector. Health care is another possibility for the process to be used. For example, say an individual is injured in an accident that results in medical attention which in turn racks up $40,000 worth of medical bills. The health insurance company that covers the injured individual is permitted to collect $40,000 from the party that is at-fault to cover the bills that they paid for.

Subrogation & Insured Individuals

Subrogation is intended to protect individuals who are insured, the two companies that cover two separate parties work together in order to find a happy middle ground to legally conclude the incident. The insured individuals usually benefit due to the party whose fault it was having to make payments during the process of subrogation to the insurer. These payments that are made aid in keeping the policyholder’s insurance rates at a low percentage.

If a settlement is reached outside of court between two parties, this frequently renders the subrogation process useless as most settlements will incorporate a waiver of subrogation that prohibits this action taking place.