Property claims glossary
What is subrogation in property insurance?
Subrogation is the carrier's right, after paying a claim, to recover that payment from the third party who caused the loss, such as a negligent contractor or the maker of a faulty product. It matters on a property claim because the evidence has to be preserved early, and a successful recovery can also return the family's deductible.
Worked example · fictitious claim
A water heater fails and causes $40,000 of damage. The carrier pays $40,000 − $1,000 = $39,000 after the family's $1,000 deductible, then recovers the full $40,000 from the manufacturer. The carrier keeps $39,000 and reimburses the family's $1,000 deductible.
How it affects a settlement
Subrogation does not reduce what the family is paid; the carrier pays the claim first and recovers later. Missing it leaves recoverable money on the table, and failing to keep the failed part or other evidence can lose the recovery altogether.
In practice
The carrier's right to recover what it paid on a claim from a third party who caused the loss: a negligent contractor, a product manufacturer, another insurer. Missed subrogation opportunities are a quieter form of leakage: money that was recoverable and never pursued.
Related
Claims leakage · Salvage · Claims leakage · property claims glossary