Subrogation is a term that's well-known among legal and insurance professionals but sometimes not by the policyholders who hire them. If this term has come up when dealing with your insurance agent or a legal proceeding, it would be in your self-interest to comprehend an overview of how it works. The more knowledgeable you are, the better decisions you can make with regard to your insurance company.

Any insurance policy you hold is a promise that, if something bad happens to you, the business on the other end of the policy will make restitutions in one way or another in a timely manner. If your vehicle is in a fender-bender, insurance adjusters (and the judicial system, when necessary) determine who was to blame and that person's insurance covers the damages.

But since ascertaining who is financially accountable for services or repairs is typically a tedious, lengthy affair – and delay often adds to the damage to the policyholder – insurance companies in many cases opt to pay up front and assign blame after the fact. They then need a method to get back the costs if, once the situation is fully assessed, they weren't actually in charge of the expense.

Let's Look at an Example

You are in a vehicle accident. Another car ran 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 her insurance should have paid for the repair of your auto. How does your insurance company get its money back?

How Does Subrogation Work?

This is where subrogation comes in. It is the method that an insurance company uses to claim reimbursement when it pays out a claim that turned out not to be its responsibility. Some insurance firms 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 person 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 that was originally due to you, because it has covered the amount already.

How Does This Affect Policyholders?

For starters, 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 have a stake in the outcome as well – to the tune of $1,000. If your insurer is lax about bringing subrogation cases to court, it might choose to recover its losses by raising your premiums. On the other hand, if it knows which cases it is owed and pursues them enthusiastically, it is acting both in its own interests and in yours. If all of the money is recovered, you will get your full thousand-dollar deductible back. If it recovers half (for instance, in a case where you are found one-half at fault), you'll typically get $500 back, depending on your state laws.

Furthermore, 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 criminal defense law Springville UT, successfully press a subrogation case, it will recover your costs as well as its own.

All insurance agencies are not the same. When comparing, it's worth contrasting the records of competing firms to determine if they pursue winnable subrogation claims; if they resolve those claims without dragging their feet; if they keep their policyholders informed as the case continues; and if they then process successfully won reimbursements quickly so that you can get your deductible back and move on with your life. If, on the other hand, an insurer has a reputation of honoring claims that aren't its responsibility and then covering its bottom line by raising your premiums, you should keep looking.