Subrogation is a term that's understood among legal and insurance companies but sometimes not by the people they represent. Even if it sounds complicated, it would be in your benefit to comprehend an overview of the process. The more you know about it, the better decisions you can make with regard to your insurance company.

Every insurance policy you have is a commitment that, if something bad happens to you, the company on the other end of the policy will make good in one way or another without unreasonable delay. If your vehicle is hit, insurance adjusters (and police, when necessary) decide who was at fault and that party's insurance covers the damages.

But since ascertaining who is financially accountable for services or repairs is sometimes a confusing affair – and delay in some cases increases the damage to the policyholder – insurance firms often decide to pay up front and assign blame after the fact. They then need a method to regain the costs if, once the situation is fully assessed, they weren't responsible for the expense.

Let's Look at an Example

You are in an auto accident. Another car ran into yours. The police show up to assess the situation, you exchange insurance details, and you go on your way. You have comprehensive insurance that pays for the repairs right away. Later police tell the insurance companies that the other driver was entirely at fault and his insurance should have paid for the repair of your vehicle. How does your company get its money back?

How Does Subrogation Work?

This is where subrogation comes in. It is the process that an insurance company uses to claim reimbursement 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. Normally, only you can sue for damages done 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.

Why Should I Care?

For one thing, if your insurance policy stipulated a deductible, your insurer wasn't the only one that had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – namely, $1,000. If your insurance company is timid on any subrogation case it might not win, it might choose to recover its losses by increasing your premiums and call it a day. On the other hand, if it knows which cases it is owed and goes after them efficiently, it is acting both in its own interests and in yours. If all of the money is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found 50 percent responsible), you'll typically get half your deductible back, based on the laws in most states.

In addition, 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 workers compensation Paddock Lake, WI, pursue subrogation and succeeds, it will recover your costs in addition to its own.

All insurers are not the same. When shopping around, it's worth measuring the reputations of competing firms to determine whether they pursue valid subrogation claims; if they resolve those claims with some expediency; if they keep their accountholders updated 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 firm has a reputation of paying out claims that aren't its responsibility and then protecting its profitability by raising your premiums, even attractive rates won't outweigh the eventual headache.