Subrogation is a term that's well-known among insurance and legal companies but sometimes not by the policyholders who employ them. Even if you've never heard the word before, it would be to your advantage to comprehend an overview of how it works. The more information you have, the better decisions you can make with regard to your insurance company.

An insurance policy you own is a promise that, if something bad occurs, the insurer of the policy will make good in one way or another in a timely manner. If your vehicle is rear-ended, insurance adjusters (and police, when necessary) decide who was at fault and that person's insurance covers the damages.

But since figuring out who is financially responsible for services or repairs is usually a tedious, lengthy affair – and time spent waiting sometimes adds to the damage to the victim – insurance firms usually decide to pay up front and figure out the blame later. They then need a path to get back the costs if, when all is said and done, they weren't actually responsible for the payout.

Can You Give an Example?

You head to the hospital with a sliced-open finger. You give the receptionist your health insurance card and he takes down your plan information. You get stitched up and your insurance company gets a bill for the medical care. But on the following afternoon, when you clock in at your workplace – where the injury happened – you are given workers compensation forms to turn in. Your company's workers comp policy is in fact responsible for the payout, not your health insurance company. It has a vested interest in getting that money back in some way.

How Subrogation Works

This is where subrogation comes in. It is the method that an insurance company uses to claim payment 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. Under ordinary circumstances, only you can sue for damages to your person or property. But under subrogation law, your insurance company is considered to have some of your rights for making good on the damages. It can go after the money originally due to you, because it has covered the amount already.

Why Do I Need to Know This?

For a start, if you have a deductible, it wasn't just your insurance company that had to pay. In a $10,000 accident with a $1,000 deductible, you have a stake in the outcome as well – to be precise, $1,000. If your insurance company is unconcerned with pursuing subrogation even when it is entitled, it might choose to recover its losses by raising your premiums. On the other hand, if it knows which cases it is owed and goes after them aggressively, it is doing you a favor as well as itself. If all is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found one-half at fault), you'll typically get half your deductible back, depending on your state laws.

In addition, if the total price 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 Personal injury attorney Lithia Springs, GA, successfully press a subrogation case, it will recover your costs as well as its own.

All insurance agencies are not the same. When shopping around, it's worth looking up the reputations of competing firms to find out if they pursue valid subrogation claims; if they resolve those claims fast; if they keep their customers informed 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, instead, an insurance firm has a record of paying out claims that aren't its responsibility and then protecting its income by raising your premiums, you'll feel the sting later.