What Is Subrogation And Why Is It Important

In simple terms, subrogation means the substitution of an individual or set of individuals by another.

This concept is mainly used in debt or insurance claims. In this concept, if an individual has received claims from an insurer for the losses of property or articles, then the title and ownership of the damaged property or articles are shifted to the insurance company.

The insurance company can also sue the third party that was responsible for the damage. So, subrogation is the right for an insurance company to legally take on a third party that caused an insurance loss to the insured. The insured individual has to deliver papers and instruments that are vital to secure these rights.

Table Content

  • What is Subrogation?
  • Subrogation in Indian Law
  • Examples of Subrogation
  • Stolen Car
  • Destruction of House
  • Meet an Accident
  • Importance of Subrogation
  • Key Points need to know
  • Conclusion
  • Related posts:

What is Subrogation?

First, we will try to understand subrogation. Under this insurance claim action, you get that money, in which the loss is yours, but the loss payer pays the money and not the insurance company. Let’s try to understand in an easy way. You will meet an accident but in this accident nothing wrong and because of a third party you got lost in an accident. If you are an insurer then definitely you want the penalty of your damages which is done by a third party.

In this situation, you use subrogate rights. You subrogate your power to your insurer company. Your insurance company will fight for you on behalf of you for your damage and losses. The transferring of this power or right is called subrogation.

Look, you will never want to bear the loss and waste your time by going around the court. In such a time, you use a service like a subrogate, which saves your time and you also get compensation for your loss.

Subrogation in Indian Law

Indian law allows the insurer to own the rights of the property after compensating for the losses. The insurer is not allowed to receive compensation from the third party for more than what it has paid to the insured individual.

This means if an insurance company has paid Rs. 2 lakh to a policyholder in case of a car accident, then the company cannot get more than Rs. 2 lakh as compensation from the wrongdoer. 

This doctrine comes with multiple limitations. It is not applicable to personal accident and life policies. Therefore, it is mainly associated with property and casualty insurance.

The insurer is supposed to pay the compensation to the policyholder before it can claim subrogation. In the legal system, there is no defense against the principle of subrogation.

The principle of subrogation is often confused with the principle of contribution. In the concept of contribution, the aim is to distribute the loss if the individual has taken insurance policies from different insurers for the same goods.

In subrogation, the loss is transferred from one individual to another.

Examples of Subrogation

Let’s understand the concept of subrogation with these two examples:

  • Stolen Car

In case you have parked your car at a specific place and it gets stolen. You will get a full claim from the insurance company as per your policy.

For getting the claim, you have to sign a letter of subrogation, this means you lose the rights of the lost car or its ownership, as these are transferred to the insurance company.

In case the car is actually found in the future, the insurer will be the car’s owner.

  • Destruction of House

Suppose you insured your house for Rs. 15 lakh. The house gets destroyed due to some inappropriate action of your neighbor Mr. Ajay. You will receive compensation of Rs. 15 lakh from the insurance company. In this scenario, the insurer can file a lawsuit against Mr. Ajay for Rs. 15 lakh.

  • Meet an Accident

As we already give an example, the same situation put. If you met up an accident and in this accident, the fault is of the third party, in this situation you just use subrogate power if you already insured your car. Subrogate is a kind of service that every insurance is looking for, with this they also earn profit and this is why “subrogate” service is available in between us and by the time it becomes most important for an insurance company and for people also.

Additional Reading: Claim Process For Health Insurance From Multiple Insurers!

Importance of Subrogation

Now, you might be thinking that if this concept is associated with the insurance providers, how it can benefit the policyholders.

Well, it is indirectly beneficial for the policyholders, The money recovered through the process of subrogation goes to the profits of the insurance company. And these profits are insurance is the best way to earn profit without making any kind of investment, they just play a vital role in subrogation and make huge profits and that’s why some insurance companies have an effective subrogation department. An active subrogation team lets the company perform better than its counterparts.

As we told you making a huge profit is the only matter for all of us, and insurance companies are always on the lookout for such opportunities. As a result, the company starts offering lower premiums to its customers. Several additional benefits are also included in the packages.

Key Points need to know

Before using Subrogation, you need to know certain things most probably that’ll affect your “subrogate power”. 

  • If it is needed, you have to pay a charge, as a  waiver of subrogation.  
  • The insurer can exercise the right of subrogation only after the claim has been paid in full.
  • No need to worry, in case of subrogation because there is transparency between the insurer and the insured and it’s enough to make this service one of the best services.


A lot of individuals are unaware of this clause while purchasing the policy, which often creates a conflict at later stages.

Therefore, it is important to understand this concept before buying the policies. The individuals can also discuss the clause with customer support representatives to get a better idea of the same.

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