Subrogation is an idea that's well-known among insurance and legal professionals but rarely by the customers they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it would be to your advantage to understand an overview of the process. The more you know, the better decisions you can make about your insurance company.

Every insurance policy you own is an assurance that, if something bad occurs, the business that insures the policy will make restitutions in a timely manner. If you get hurt at work, for example, your employer's workers compensation insurance picks up the tab for medical services. Employment lawyers handle the details; you just get fixed up.

But since determining who is financially responsible for services or repairs is often a confusing affair – and delay sometimes adds to the damage to the victim – insurance companies usually decide to pay up front and figure out the blame afterward. They then need a method to recover the costs if, when all the facts are laid out, they weren't actually responsible for the payout.

Let's Look at an Example

Your kitchen catches fire and causes $10,000 in house damages. Happily, you have property insurance and it takes care of the repair expenses. However, the assessor assigned to your case finds out that an electrician had installed some faulty wiring, and there is a decent chance that a judge would find him liable for the damages. The home has already been repaired in the name of expediency, but your insurance firm is out ten grand. What does the firm do next?

How Subrogation Works

This is where subrogation comes in. It is the process that an insurance company uses to claim payment after it has paid for something that should have been paid by some other entity. Some companies have in-house property damage lawyers and personal injury attorneys, or a department dedicated to subrogation; others contract with a law firm. Ordinarily, only you can sue for damages done to your self or property. But under subrogation law, your insurer is considered to have some of your rights for making good on the damages. It can go after the money originally due to you, because it has covered the amount already.

Why Does This Matter to Me?

For one thing, if you have a deductible, your insurer wasn't the only one who had to pay. In a $10,000 accident with a $1,000 deductible, you have a stake in the outcome as well – namely, $1,000. If your insurer is timid on any subrogation case it might not win, it might opt to recoup its expenses by ballooning your premiums. On the other hand, if it knows which cases it is owed and pursues those cases aggressively, it is acting both in its own interests and in yours. If all $10,000 is recovered, you will get your full $1,000 deductible back. If it recovers half (for instance, in a case where you are found 50 percent at fault), you'll typically get $500 back, depending on your state laws.

In addition, if the total loss of an accident is more than your maximum coverage amount, you could be in for a stiff bill. If your insurance company or its property damage lawyers, such as medical malpractice Mclean Va, successfully press a subrogation case, it will recover your costs as well as its own.

All insurance agencies are not created equal. When comparing, it's worth looking up the reputations of competing firms to determine if they pursue legitimate subrogation claims; if they resolve those claims quickly; if they keep their accountholders advised as the case proceeds; and if they then process successfully won reimbursements quickly so that you can get your funding back and move on with your life. If, instead, an insurer has a reputation of honoring claims that aren't its responsibility and then protecting its bottom line by raising your premiums, you'll feel the sting later.