What to Know About a Waiver of Subrogation

Settling quickly can cut your insurance company out of the process.


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While most drivers hope to never be in an accident, it helps to prepare for the possibility that you may find yourself in a fender bender or a worse collision. You may know that the standard exchange between at-fault and not-at-fault driver includes insurance information. This exchange happens because the two companies work together to determine who will pay for the damages in the accident.

However, there is another option: At-fault drivers could opt to settle and pay out-of-pocket for repairs or medical expenses. One way to do this involves signing a document known as a waiver of subrogation. It's important to understand the consequences of this decision before you put ink to paper, and you'll want to talk to your insurance company before choosing to sign a document like this. Here's what you should know about waivers of subrogation.

What Is A Waiver of Subrogation?

A waiver of subrogation involves terminating an insurance company's right of subrogation. Subrogation is the method by which the insurance company of a not-at-fault driver can pursue damages on behalf of their client, ensuring that the insurance company of the at-fault driver pays out the claim correctly and on time.

When a driver who’s not at fault signs one of these waivers, they’re agreeing that their insurance company won't pursue the at-fault driver or their insurer for additional damages. It makes sense for the at-fault driver to make sure the other driver won't take whatever payment they're offering and then still file for an insurance claim, effectively trying to double-dip on the payout.

When is a Waiver of Subrogation Used?

There are a variety of contexts for waivers of subrogation, but when car insurance claims are involved, there's a fairly common reason they're used. If an at-fault driver doesn't want to work with their insurance company, they may propose a settlement, an amount of money that they'll pay to avoid going through the typical claim process. You're most likely to see one or be offered one if you're working with an at-fault driver who would rather settle the issue without filing through insurance.

Pros and Cons of Signing a Waiver of Subrogation

There can be situations where you'd benefit from a waiver of subrogation. If an at-fault driver is underinsured or uninsured, the settlement may be a way to receive the needed funds for your expenses without a lot of hassle and without getting too little in the payout. It can also be very quick, helping you get your car fixed and back on the road.

On the other hand, these waivers can be considered a way of side-stepping your insurance company and the role they expect to play. Some insurers don't allow you to sign waivers of subrogation, so you might be in violation of your insurance policy's terms and have your policy canceled if you choose to sign one. Another con is that an insurance company may know better than you do whether the settlement amount is fair or somewhat low compared to what they could get through subrogation.

Without a Waiver, How Does the Insurance Company Use Subrogation?

If you choose not to sign a waiver of subrogation, your insurance company gets in touch with the insurance company of the at-fault driver. Negotiating claims is a very routine interaction, but if for some reason the paying insurer drags their feet or tries to pay less than what is owed, your insurance company can reach out and pursue the claim. If you waive subrogation, their hands are tied with regard to securing any additional compensation for the damages. In this case, you would only get whatever the at-fault driver or their insurance company gives you, with no continued recourse to pursue them if the amount is insufficient.

Knowing Car Insurance Terms Helps You Make Strong Choices

You don't want to hear about a waiver of subrogation for the first time when you're handed one and asked to sign it. Understanding car insurance terms is just as important as looking into your car insurance rates, so make sure you ask questions as you get to know your car insurance policy, and find an agent you trust and can call whenever you need advice. You'll be glad you became a more informed driver and insurance customer when challenging situations arise.

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Laura Leavitt
I love a good spreadsheet and will happily calculate compound interest all day, but my biggest focus is helping people achieve their financial goals. That could be saving up for a dream car or calculating the right car payment for your budget so you can get a reliable daily driver. I research and write about personal finance so that making great financial choices becomes easier for us all.