Subrogation is an idea that's well-known in legal and insurance circles but rarely 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 to your advantage to understand the steps of how it works. The more you know about it, the more likely relevant proceedings will work out favorably.

An insurance policy you hold is an assurance that, if something bad occurs, the company on the other end of the policy will make restitutions in one way or another in a timely manner. If your vehicle is rear-ended, insurance adjusters (and the judicial system, when necessary) determine who was at fault and that party's insurance pays out.

But since ascertaining who is financially responsible for services or repairs is typically a confusing affair – and time spent waiting often increases the damage to the victim – insurance firms often decide to pay up front and figure out the blame later. They then need a path to recover the costs if, when all is said and done, they weren't actually responsible for the payout.

For Example

You arrive at the Instacare with a deeply cut finger. You hand the nurse your health insurance card and she records your policy information. You get taken care of and your insurer is billed for the expenses. But on the following day, when you arrive at your workplace – where the accident occurred – your boss hands you workers compensation paperwork to file. Your workers comp policy is actually responsible for the payout, not your health insurance policy. It has a vested interest in getting that money back in some way.

How Does Subrogation Work?

This is where subrogation comes in. It is the process 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 person or property. But under subrogation law, your insurer is given 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.

How Does This Affect Policyholders?

For one thing, if your insurance policy stipulated a deductible, your insurer wasn't the only one who had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – to the tune of $1,000. If your insurance company is timid on any subrogation case it might not win, it might opt to get back its expenses by boosting your premiums and call it a day. 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 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 to blame), you'll typically get $500 back, depending on the laws in your state.

Additionally, if the total expense 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 auto accident attorney Norcross GA, successfully press a subrogation case, it will recover your costs in addition to its own.

All insurance agencies are not the same. When comparing, it's worth looking up the records of competing firms to determine whether they pursue winnable subrogation claims; if they do so without delay; if they keep their customers posted as the case proceeds; and if they then process successfully won reimbursements right away so that you can get your losses back and move on with your life. If, instead, an insurance firm has a record of honoring claims that aren't its responsibility and then safeguarding its profit margin by raising your premiums, even attractive rates won't outweigh the eventual headache.