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Subrogation is an idea that's well-known in insurance and legal circles but sometimes not by the policyholders who hire them. Rather than leave it to the professionals, it would be to your advantage to understand 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 hold is a commitment that, if something bad happens to you, the company that covers the policy will make restitutions in a timely fashion. If you get hurt on the job, for instance, your employer's workers compensation insurance picks up the tab for medical services. Employment lawyers handle the details; you just get fixed up.

But since determining who is financially accountable for services or repairs is often a confusing affair – and time spent waiting in some cases adds to the damage to the victim – insurance firms usually opt to pay up front and assign blame afterward. They then need a way to recoup the costs if, when all the facts are laid out, they weren't in charge of the expense.

Can You Give an Example?

Your living room catches fire and causes $10,000 in house damages. Fortunately, you have property insurance and it pays for the repairs. 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 to blame for the loss. The house has already been repaired in the name of expediency, but your insurance agency is out ten grand. 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 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 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 originally due to you, because it has covered the amount already.

How Does This Affect Policyholders?

For starters, 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 insurance company is unconcerned with pursuing subrogation even when it is entitled, it might choose to get back its losses by increasing your premiums and call it a day. On the other hand, if it has a capable legal team and goes after those cases aggressively, it is doing you a favor as well as itself. If all $10,000 is recovered, you will get your full thousand-dollar deductible back. If it recovers half (for instance, in a case where you are found one-half culpable), you'll typically get half your deductible back, depending on your state laws.

Furthermore, if the total expense 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 when to get a real estate lawyer Lake Geneva, WI, pursue subrogation and wins, it will recover your costs in addition to its own.

All insurance companies are not the same. When comparing, it's worth examining the reputations of competing agencies to evaluate if they pursue legitimate subrogation claims; if they do so with some expediency; if they keep their clients informed as the case proceeds; 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, instead, an insurance company has a reputation of honoring claims that aren't its responsibility and then covering its bottom line by raising your premiums, you'll feel the sting later.