Insurance policies have a
number of clauses, exclusions and conditions. Any person before signing an
insurance policy must understand the clauses contained in the insurance policy.
One such important clause is the subrogation clause in the insurance policy.
Subrogation in an insurance
policy is the clause that allows the insurance company to take up a legal
pursuit against the third party that has caused the damage to the insured party
for which the claim has been made. For instance, if you have taken a car insurance and your
car gets damaged in an accident, the subrogation clause gives your insurance
company the right to pursue legal action for recovering the cost of damages
from the third party that has caused the accident. The insurer can take legal action after paying you the
cost of the damages and recover the money from the third party.
The subrogation
clause applies to fire, marine and non-life policies such as motor insurance,
health insurance etc. One important
aspect of this clause is the waiver of subrogation. This has an impact
on the price of the policy and the claims process. Read on to know more about
waiver of subrogation clause in insurance policies.
Meaning of waiver
of subrogation in insurance policies
Waiver of
subrogation clause in insurance policies indicates the choice of the policy
holder to deny the insurance company the right to undertake legal action
against the third party responsible for any loss covered under the policy. In
other words, the insurance company cannot recover the costs for any loss from
the third-party responsible for the loss.
However, if you as
a policyholder opt for waiver of subrogation, the premium on the policy will be
higher.
Uses of waiver of
subrogation clause in insurance policies
The waiver of subrogation
clause finds use in insurance policies involving construction contracts. This
clause helps to protect contractors, subcontractors and owners of properties
from claims or legal action by insurance companies who are connected to the
project thereby eliminating cross liabilities.
The waiver of
subrogation clause is a popular option in lease agreements between owners and
tenants. The clause helps avoid disputes over damage of property that is
covered by insurance policies. It helps to avoid disputes between the landlord
and tenants.
The waiver of
subrogation clause is an important aspect of vendor agreements where businesses
hire vendors for services such as transportation, cleaning or maintenance. The
waiver of subrogation clause shields the business from damages due to legal
action in case of accidents or damages incurred by the vendor.
Benefits of waiver
of subrogation
Some of the
benefits of taking insurance policies with the waiver of subrogation clause were
covered above. The other benefits of the clause are:
Helps to maintain
good relations: The waiver of subrogation clause
helps in maintaining good relationships between parties entering into a
contract because it avoids the incidence of insurance company of one party from
seeking compensation from the insurer of the other party or directly from the
opposite party.
Avoids disputes: Parties in a contract that opt for waiver of subrogation can
reduce conflicts and consequently any law suits.
Saves on legal
expenses: The waiver of subrogation clause helps
individuals or businesses save on costs connected to lawsuits because there are
no defence costs or reimbursements to be paid.
Drawbacks of
waiver of subrogation clause
Additional premium
costs: As we mentioned earlier opting for the waiver
of subrogation will require paying a higher premium to insurance companies. But
the advantage of avoiding legal disputes can justify the extra amount of
premium for businesses.
Reduced recovery
options: Individuals or businesses opting for a waiver
of subrogation are giving up their right to seek compensation from the
insurance company of the other party. This puts a limit on the compensation
they can claim in case of accidents or damages.
Possibility of
limitations in coverage: There may be limitations in
the use of the waiver of subrogation clause in certain insurance policies. So,
it is better to read the insurance policy carefully or consult with an
insurance provider or an insurance broker to understand these limitations and
ensure compliance.
The waiver of
subrogation clause in insurance policies helps businesses maintain a smooth
relationship with their partners. This is more evident if there is a mutual
waiver of subrogation. What this means is that you can avoid lengthy legal
processes or lawsuits or time-consuming negotiation processes to settle a
claim.
companies bring down their risk exposure
because they have an opportunity to recover part of the claim amount. As a
policyholder you will stand to benefit because it will bring your premium cost
down.
Before you
purchase an insurance policy that has a waiver of subrogation feature you
should be aware of the advantages or disadvantages of the feature. It is best
to approach an insurance broker to get a clear understanding and take the right
decision.
We at Zen Insurance Brokers
assist in choosing an insurance policy with clauses suited to your
requirements. Choose your insurance policy wisely. Get in touch with us for any
assistance.
Disclaimer:
Zen Insurance Brokers is an
IRDA registered broker which facilitates quick and adequate insurance broking
services. We deal with only regulator approved products of insurers. We do not
underwrite the products.
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