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Subrogation is a concept that's understood among insurance and legal professionals but sometimes not by the customers who employ them. Even if you've never heard the word before, it is in your benefit to know an overview of how it works. The more knowledgeable you are, the better decisions you can make with regard to your insurance company.

Every insurance policy you have is a promise that, if something bad occurs, the insurer of the policy will make restitutions without unreasonable delay. If your vehicle is hit, insurance adjusters (and the courts, when necessary) decide who was to blame and that person's insurance covers the damages.

But since determining who is financially responsible for services or repairs is regularly a heavily involved affair – and delay in some cases increases the damage to the policyholder – insurance firms usually decide to pay up front and figure out the blame after the fact. They then need a mechanism to recoup the costs if, once the situation is fully assessed, they weren't actually in charge of the expense.

Let's Look at an Example

Your bedroom catches fire and causes $10,000 in home damages. Fortunately, you have property insurance and it pays out your claim in full. However, in its investigation it discovers that an electrician had installed some faulty wiring, and there is reason to believe that a judge would find him responsible for the loss. The house has already been repaired in the name of expediency, but your insurance agency is out $10,000. What does the agency do next?

How Subrogation Works

This is where subrogation comes in. It is the process that an insurance company uses to claim reimbursement 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. Usually, only you can sue for damages done to your self 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 Does This Matter to Me?

For a start, if you have a deductible, it wasn't just your insurance company who 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 insurer is unconcerned with pursuing subrogation even when it is entitled, it might opt to get back its expenses by raising your premiums. On the other hand, if it knows which cases it is owed and pursues them efficiently, it is acting both in its own interests and in yours. If all ten grand is recovered, you will get your full $1,000 deductible back. If it recovers half (for instance, in a case where you are found 50 percent to blame), you'll typically get half your deductible back, based on the laws in most states.

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 attorneys that specialize in auto accidents Norcross GA, pursue subrogation and succeeds, it will recover your costs as well as its own.

All insurers are not the same. When comparing, it's worth looking at the reputations of competing agencies to evaluate whether they pursue legitimate subrogation claims; if they do so quickly; if they keep their clients apprised as the case continues; and if they then process successfully won reimbursements right away 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 bottom line by raising your premiums, you should keep looking.