Subrogation in insurance: Definition, types, and waiver

The subrogation clause gives the insurer the right to pursue a third party for a compensation owed to you.

It is essential to know the clauses mentioned in an insurance policy coverage and reading to their fine prints. The subrogation clause in insurance is one clause that requires special attention. Here is a thorough assessment of the subrogation meaning in health and auto insurance policies, why it is important, and whether it is mandatory. Read on

What is subrogation?

Subrogation refers to the legal process followed by an insurance company when it pursues a third party for damages owed to an insured individual. In other words, when an insurance company steps into the shoes of an insurer and seeks compensation for the losses borne by the insured person from a third party, the procedure is called subrogation.

Subrogation in auto insurance

In the context of auto insurance, subrogation occurs when the insurance company bears the financial expenses of the insured by seeking a repayment from the defaulter. For example, suppose you have suffered injuries due to an accident caused by a third party. In that case, subrogation gives your insurance company the legal right to step into your shoes and seek compensation for the damages caused to your car.

Types of subrogation

Insurance companies generally follow three types of subrogation:

• Equitable

• Contractual

• Statutory

While equitable subrogation and contractual subrogation require the insurance company to pursue a legal proceeding against a third party, statutory subrogation doesn’t necessitate the involvement of the insurance company.

In a statutory subrogation, the insured and the insurance company arrive at a consensus on the sum owed by the third party to the insured individual.

Subrogation can also apply to health insurance policies. It can be claimed when the insured individual has suffered injuries due to a third party’s mistake and intends to bear their expenses.

What is a waiver of subrogation?

When an insured person waives the right of an insurance company to pursue a third party who is a defaulter, the contractual provision is called a waiver of subrogation. You relinquish your insurance company’s right to pursue a certain third party seeking compensation by waiving your right of subrogation. Most insurance companies charge an additional fee for a waiver of the subrogation clause. It is usually mentioned in the policy document, and it is advisable to go through this document carefully before purchasing an insurance policy that contains a subrogation clause.

Subrogation: things to be kept in mind

Before purchasing an insurance product, you must know whether the policy contains a subrogation clause or not. Generally, an insured individual can access their right to subrogation only after receiving the claim amount from the policyholder. The insured individual also has the right to waiver subrogation and may have to pay an additional fee to waive off this right.

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