Subrogation is a term that's well-known among legal and insurance professionals but sometimes not by the policyholders they represent. Even if you've never heard the word before, it is in your self-interest to know the steps of how it works. The more knowledgeable you are, the better decisions you can make with regard to your insurance policy.

Every insurance policy you have is a promise that, if something bad occurs, the company on the other end of the policy will make good in a timely fashion. If you get hurt on the job, for example, your company's workers compensation insurance agrees to pay for medical services. Employment lawyers handle the details; you just get fixed up.

But since figuring out who is financially responsible for services or repairs is usually a time-consuming affair – and time spent waiting often increases the damage to the victim – insurance companies often opt to pay up front and figure out the blame later. They then need a path to regain the costs if, when all is said and done, they weren't actually responsible for the expense.

For Example

Your living room catches fire and causes $10,000 in home damages. Luckily, you have property insurance and it takes care of the repair expenses. However, the assessor assigned to your case discovers that an electrician had installed some faulty wiring, and there is a decent chance that a judge would find him accountable for the loss. The house has already been fixed up in the name of expediency, but your insurance agency is out all that money. What does the agency do next?

How Does Subrogation Work?

This is where subrogation comes in. It is the way that an insurance company uses to claim reimbursement after it has paid for something that should have been paid by some other entity. 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. Usually, 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 in exchange 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 a start, if you have 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 – to be precise, $1,000. If your insurer is lax about bringing subrogation cases to court, it might choose to recoup its losses 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 is recovered, you will get your full thousand-dollar deductible back. If it recovers half (for instance, in a case where you are found 50 percent to blame), you'll typically get $500 back, depending on your state laws.

Additionally, 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 criminal defense lawyer near me, successfully press a subrogation case, it will recover your losses as well as its own.

All insurance agencies are not created equal. When shopping around, it's worth scrutinizing the reputations of competing companies to determine if they pursue valid subrogation claims; if they resolve those claims with some expediency; if they keep their customers advised 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, on the other hand, an insurer has a record of honoring claims that aren't its responsibility and then covering its income by raising your premiums, even attractive rates won't outweigh the eventual headache.