Principle of Subrogation in General Insurance – Explained


Insurance is a legal obligation between you, the policyholder, and the insurance company to make good for the losses. It is no means to make profits, but in fact, reimburse the loss that may occur. A general insurance cover is purchased to safeguard yourself from the damages that either may be your fault or some third person. But it isn’t always the loss may arise when you are at fault.

A common example of such scenario is when an accident occurs without any fault of yours. It is an annoyance, but you still have to deal with the damages and a general insurance plan comes handy at these times. Insurance companies reimburse the loss or the cost of repairs. These losses can however be reimbursed from such third person as per the principle of subrogation.

What is subrogation in general insurance?

The principle of subrogation in general insurance substitutes the insurer in your place, i.e. the policyholder, to pursue such third person and reimburse the damages. It is a legal right transferred to the insurance company to claim the money from a third person. To simplify, subrogation can be referred to as substitution where the insurance company, instead of you, can follow up with either the third person or such third person’s insurer to compensate for the loss. However, all of it is done after the compensation is paid to you.

The principle of subrogation is categorised under the indemnity clause which is a contract between you and the insurance company. This clause mentions the obligation of the insurer to compensate for the damages caused.

How does subrogation work?

Subrogation is commonly observed in general insurance plans and involves three parties—the insurer, the policyholder and the third-party at fault. The process of subrogation starts when you, the policyholder, raise a claim with your insurance company for damages sustained due to such third person. Once this claim is settled, the insurance company initiates the process of retrieving the claim amount. But before that, all your legal rights to sue such third person are acquired by the insurer, in effect, substituting the insurer in your place.

Some insurance companies even include the amount of deductible in the subrogation process. In such a case, you will be entitled to claim the deductibles as well in your insurance claim once the third-party compensates for it. * Standard T&C Apply

Basis pointers concerning principle of subrogation

Here are some pointers about subrogation when it comes to third party insurance:

  • The process of subrogation is generally a transparent process that occurs between you and your insurance company. The rights concerning subrogation are mentioned in your policy document.
  • The insurer must acquire your consent before proceeding with the subrogation process.
  • Further, the subrogation by the insurer can only take place once you, the policyholder, have been fully indemnified. However, some insurance companies may begin the subrogation in your name even if the negotiation concerning the compensation is ongoing.
  • The insurance company has a right to charge legal offence against such guilty third person that has resulted in a damage to your vehicle.

These are some of the must-know about principle of subrogation. Make sure to carefully understand what is general insurance policy that you have bought and its features before buying. Also, remember, insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms and conditions, please read sales brochure/policy wording carefully before concluding a sale.

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