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What the heck is subrogation? ...And why should I care?

Subrogation is a very fancy term for the "back room" negotiation that goes on once an insurance claim is being settled.

An example: A SnowBird goes south for the winter and is involved in a serious car accident the medical bill is  $100,000.

The SnowBird has limited credit card coverage, car insurance, travel insurance and a retiree plan that pays a lifetime maximum of $50,000 dollars CAN.

Who Pays?

Well, believe it or not, even with all that insurance coverage, it could end up being the SnowBird!

In the back room negotiations that follow, each of the insurers jockeys for position to be "last payor". That is to say the entity that pays the balance left over after everyone else has chipped in.

Retiree Plans

This is often the plan that is put on the hook as first payor. This would be fine if your retiree plan has an unlimited lifetime maximum, however that is rarely the case. As a result, a large claim could bite into that lifetime maximum - and reduce the benefits you could receive later in life. 

Given the regrettable statistic that most of us will need some form of long term care in our life, it is not a benefit to give up lightly.

Credit Card Coverage 

This is probably not going to win us any friends at the credit card companies... But we do not recommend relying on credit card coverage. There's a good reason it's given away free (or nearly free). Because it is only designed to pay in a very narrow set of circumstances. The insurance companies that provide this coverage are generally very good, but they are also very diligent in making sure that they only pay what they are on the hook for.

Car Insurance

Car insurance regulations vary province by province and state by state. In Canada, there are guidelines established for how car insurers deal with subrogation, but the key  issue is not the car insurance, but the travel insurance.

Travel Insurance

There are two groups that work with the travel insurance industry that help control the potential messiness of situations like the example above.

The first is the Canadian Life and Health Insurance Association. Member companies agree (among other things) to leave retiree plans with limited lifetime maximums off the negotiating table. The rules and the dollar amounts change, so you will have to check with the insurer, but generally anything under $50,000 is safe.

The second is the Travel Health Insurance Association. Which promotes similar guidelines, but has International membership.

Both organizations have recommendations on how travel insurers should work with Car Insurance companies and other health insurers.

Non Subrogation/First Payor

This technical issue is one of many reasons you should use a trusted travel insurance professional. But take heart, because this is a key issue for some SnowBirds, a number of travel insurers offer a "Non Subrogation" option for a small surcharge.

This means that (for a few bucks more) the travel insurer agrees to be First Payor...which we think is a very good option for those with vulnerable retiree plans.