Understanding the Definition of Subrogation in Insurance

Car insurance is one of the most common types of insurance available. In this insurance type, the insurer promises to offer coverage to the insured, their vehicle and third-party liability, depending on the type of plan selected. A car insurance calculator can calculate the cost of a car insurance premium. While looking through your car insurance policy documents, you might have come across the term “Subrogation.” 

Subrogation can be helpful for those who find themselves in a situation where damages to their car are incurred due to the recklessness of a third-party individual. Let’s discuss in detail about what is subrogation in car insurance when you buy car insurance online.

What is Subrogation in Insurance?

A fair practice of reinstating the policyholders’ position with the insurer is the best way to define subrogation in insurance. In simple terms, through subrogation, you will hand over all the legal rights to your insurance provider to claim money from a third party, in case they are guilty of an accident. 

A contract between an insurer and a policyholder includes obligations and procedures to compensate any insurance claim amount against losses to your car. This contract is known as the indemnity clause, and subrogation comes under it.

 How Does Subrogation Work in Car Insurance

The common process of subrogation in 4-wheeler insurance involves three parties: the insurance provider, the policyholder, and the third party that caused the damage to your car. This process begins with the policyholder claiming the cost of damages incurred in an accident caused by a third party. 

The insurance provider first settles the claim with the insured and then proceeds to retrieve the claim amount. Before starting the claim amount retrieval process, the insurer requests the legal rights to sue the third-party individual who caused the accident. 

Further, the policyholder gives all legal rights to the insurer so that they can pursue the third-party individual on behalf of the policyholder. 

You must remember that in the process of subrogation, some insurance providers include certain deductible amounts. In this case, once the third-party responsible for the accident compensates the insurance provider for the damage cost, the policyholder can claim the damage and deductibles. 

The process of subrogation is fully transparent. As a policyholder, you should always review the policy details to familiarise yourself with all the legal procedures for retrieving a claim amount from a third party.

What Are The Types of Subrogation in Car Insurance Policy

Typically, there are three types of subrogation in 4-wheeler insurance. Let’s examine them.

Contractual Subrogation

It can also be called a conventional subrogation. In contractual subrogation, the insurer sues the third party (responsible for the damages to the car) on behalf of the insured. There may be instances when the insured may not wish to proceed with subrogation to maintain their peace of mind. In this case, as per the contractual subrogation, an insurer has the legal authority to sue the third party for the loss.

Equitable Subrogation

Equitable subrogation is one of the most common aspects of car insurance policies. In this subrogation, the insurance provider retrieves the claim amount from the third-party individual who caused an accident to the insured four-wheeler. 

In most cases, damages to a four-wheeler involve third parties. However, in some cases, damages can occur to your four-wheeler due to natural disasters like earthquakes, floods, etc. In this case, subrogation cannot be regulated.    

Statutory Subrogation  

This subrogation does not include an insurance company or provider to cover the damage cost of the insured four-wheeler caused by a third party. In statutory subrogation, both the third party and the insured settle the loss amount among themselves without the involvement of the insurance provider. We can say that this is the most straightforward type of subrogation. 

Important Things to Keep in Mind About Subrogation in Four-Wheeler Car Insurance

Let’s discuss some important things you should keep in mind about subrogation in car insurance.

  • Subrogation is pertinent for all insurance plans, such as property, car, and health insurance. 
  • The insurer can only exercise the subrogation after setting the claim amount with the insured.
  • Policyholders are allowed to waive the right of subrogation. However, this may require you to pay additional fees. The amount of this fee can differ among different insurance companies.
  • It is recommended that you carefully read the subrogation clause in your car insurance documents to best understand the implications of subrogation. 

To Wrap It Up

Many policyholders are not entirely aware of the clauses and other conditions related to their car insurance policy. However, this may lead to disputes or confusion with the third party in case of an accident. Subrogation is one such clause that is very crucial to understand before purchasing a car insurance policy. It must be noted that the purpose of subrogation is to get back the claim amount paid for damages to the insured for the fault of the third party.

As an insured once you file for subrogation with your insurer, the insurer will take care of the rest.

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