Subrogation is an idea that's understood among insurance and legal companies but often not by the customers who employ them. If this term has come up when dealing with your insurance agent or a legal proceeding, it is in your benefit to understand the nuances of how it works. The more you know, the more likely it is that relevant proceedings will work out favorably.

Any insurance policy you hold is a promise that, if something bad occurs, the company that insures the policy will make restitutions in one way or another in a timely manner. If your home suffers fire damage, for example, your property insurance steps in to pay you or facilitate the repairs, subject to state property damage laws.

But since ascertaining who is financially responsible for services or repairs is regularly a tedious, lengthy affair – and time spent waiting in some cases increases the damage to the victim – insurance companies often opt to pay up front and figure out the blame later. They then need a means to recoup the costs if, in the end, they weren't in charge of the payout.

Let's Look at an Example

Your living room catches fire and causes $10,000 in home damages. Luckily, you have property insurance and it pays out your claim in full. However, the insurance investigator finds out that an electrician had installed some faulty wiring, and there is a reasonable possibility that a judge would find him liable for the damages. You already have your money, but your insurance company is out ten grand. What does the company do next?

How Does Subrogation Work?

This is where subrogation comes in. It is the way 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 insurance company is given some of your rights for having taken care of the damages. It can go after the money that was originally due to you, because it has covered the amount already.

Why Does This Matter to Me?

For starters, if your insurance policy stipulated a deductible, it wasn't just your insurance company who had to pay. In a $10,000 accident with a $1,000 deductible, you have a stake in the outcome as well – to be precise, $1,000. If your insurance company is unconcerned with pursuing subrogation even when it is entitled, it might choose to get back its costs by ballooning your premiums and call it a day. On the other hand, if it knows which cases it is owed and goes after those cases efficiently, it is acting both in its own interests and in yours. If all $10,000 is recovered, you will get your full 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, based on the laws in most states.

Moreover, if the total cost of an accident is over your maximum coverage amount, you could be in for a stiff bill. If your insurance company or its property damage lawyers, such as attorney at law tumwater wa, pursue subrogation and succeeds, it will recover your expenses in addition to its own.

All insurers are not the same. When shopping around, it's worth examining the records of competing agencies to determine whether they pursue legitimate subrogation claims; if they do so in a reasonable amount of time; if they keep their customers advised as the case proceeds; and if they then process successfully won reimbursements immediately so that you can get your deductible back and move on with your life. If, instead, an insurance company has a record of honoring claims that aren't its responsibility and then protecting its bottom line by raising your premiums, you should keep looking.