Subrogation is a concept that's understood among insurance and legal firms but rarely by the policyholders they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it is to your advantage to understand the nuances of the process. The more you know, the better decisions you can make with regard to your insurance policy.

An insurance policy you own is an assurance that, if something bad happens to you, the business that insures the policy will make good without unreasonable delay. If your vehicle is in a fender-bender, insurance adjusters (and the judicial system, when necessary) decide who was to blame and that party's insurance pays out.

But since determining who is financially responsible for services or repairs is regularly a confusing affair a€" and delay in some cases adds to the damage to the policyholder a€" insurance firms often opt to pay up front and figure out the blame afterward. They then need a way to get back the costs if, ultimately, they weren't responsible for the payout.

For Example

You are in an auto accident. Another car crashed into yours. Police are called, you exchange insurance information, and you go on your way. You have comprehensive insurance that pays for the repairs right away. Later it's determined that the other driver was entirely to blame and his insurance should have paid for the repair of your auto. How does your company get its money back?

How Does Subrogation Work?

This is where subrogation comes in. It is the way that an insurance company uses to claim payment when it pays out a claim that turned out not to be its responsibility. Some companies have in-house property damage lawyers and personal injury attorneys, or a department dedicated to subrogation; others contract with a law firm. Normally, only you can sue for damages to your self or property. But under subrogation law, your insurance company is extended some of your rights for having taken care of 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 your insurance policy stipulated a deductible, your insurance company wasn't the only one who had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too a€" to the tune of $1,000. If your insurer is unconcerned with pursuing subrogation even when it is entitled, it might opt to get back its expenses by ballooning your premiums. On the other hand, if it has a capable legal team and goes after those cases efficiently, it is acting both in its own interests and in yours. If all is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found one-half responsible), you'll typically get half your deductible back, based on the laws in most states.

Moreover, if the total loss of an accident is more than your maximum coverage amount, you may have had to pay the difference. If your insurance company or its property damage lawyers, such as worker compensation terms Canton GA, pursue subrogation and wins, it will recover your costs as well as its own.

All insurance companies are not created equal. When comparing, it's worth weighing the reputations of competing firms to evaluate whether they pursue valid subrogation claims; if they resolve those claims quickly; if they keep their customers informed as the case continues; and if they then process successfully won reimbursements right away so that you can get your money back and move on with your life. If, instead, an insurance agency has a reputation of paying out claims that aren't its responsibility and then safeguarding its profitability by raising your premiums, even attractive rates won't outweigh the eventual headache.