Subrogation is a term that's understood in insurance and legal circles but sometimes not by the customers they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it would be in your self-interest to understand an overview of the process. The more you know about it, the better decisions you can make with regard to your insurance policy.

Every insurance policy you have is a commitment that, if something bad occurs, the firm on the other end of the policy will make good in one way or another without unreasonable delay. If your property is robbed, for instance, your property insurance steps in to pay you or facilitate the repairs, subject to state property damage laws.

But since determining who is financially responsible for services or repairs is sometimes a heavily involved 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 way to get back the costs if, when all the facts are laid out, they weren't actually responsible for the expense.

Let's Look at an Example

You rush into the doctor's office with a deeply cut finger. You hand the nurse your medical insurance card and he records your policy information. You get stitches and your insurance company is billed for the medical care. But on the following day, when you clock in at your place of employment – where the accident occurred – you are given workers compensation forms to file. Your employer's workers comp policy is in fact responsible for the hospital trip, not your medical insurance company. The latter has a right to recover its money in some way.

How Subrogation Works

This is where subrogation comes in. It is the way that an insurance company uses to claim payment 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. Normally, 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.

Why Do I Need to Know This?

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 lost some money too – namely, $1,000. If your insurer is lax about bringing subrogation cases to court, it might opt to get back its costs by increasing your premiums and call it a day. On the other hand, if it has a proficient legal team and goes after them aggressively, it is doing you a favor as well as itself. If all is recovered, you will get your full $1,000 deductible back. If it recovers half (for instance, in a case where you are found one-half accountable), you'll typically get half your deductible back, based on the laws in most states.

Moreover, if the total loss 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 personal injury law firm Puyallup WA, pursue subrogation and wins, it will recover your losses as well as its own.

All insurance companies are not created equal. When comparing, it's worth contrasting the reputations of competing companies to find out whether they pursue winnable subrogation claims; if they do so quickly; if they keep their policyholders posted as the case goes on; and if they then process successfully won reimbursements quickly so that you can get your funding 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 income by raising your premiums, you'll feel the sting later.