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Subrogation is an idea that's understood among legal and insurance professionals but rarely by the policyholders they represent. Even if it sounds complicated, it is in your self-interest to comprehend the nuances of how it works. The more information you have, the better decisions you can make about your insurance policy.

Any insurance policy you own is a promise that, if something bad happens to you, the insurer of the policy will make good in one way or another in a timely manner. If a windstorm damages your real estate, your property insurance steps in to compensate you or enable the repairs, subject to state property damage laws.

But since ascertaining who is financially accountable for services or repairs is usually a time-consuming affair – and delay sometimes increases the damage to the victim – insurance firms in many cases opt to pay up front and assign blame after the fact. They then need a means to get back the costs if, when there is time to look at all the facts, they weren't responsible for the expense.

For Example

Your kitchen catches fire and causes $10,000 in home damages. Happily, you have property insurance and it takes care of the repair expenses. However, in its investigation it discovers that an electrician had installed some faulty wiring, and there is a decent chance that a judge would find him responsible for the loss. The house has already been repaired in the name of expediency, but your insurance company is out $10,000. What does the company do next?

How Subrogation Works

This is where subrogation comes in. It is the way that an insurance company uses to claim reimbursement when it pays out a claim that turned out not to be its responsibility. 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 self 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 that was originally due to you, because it has covered the amount already.

How Does This Affect Individuals?

For a start, if your insurance policy stipulated a deductible, it wasn't just your insurer who had to pay. In a $10,000 accident with a $1,000 deductible, you have a stake in the outcome as well – namely, $1,000. If your insurer is timid on any subrogation case it might not win, it might opt to recoup its expenses by ballooning your premiums and call it a day. On the other hand, if it knows which cases it is owed and goes after those cases aggressively, it is doing you a favor as well as itself. If all of the money is recovered, you will get your full thousand-dollar deductible back. If it recovers half (for instance, in a case where you are found 50 percent to blame), you'll typically get $500 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 may have had to pay the difference, which can be extremely spendy. If your insurance company or its property damage lawyers, such as family law attorney Tumwater, WA, pursue subrogation and wins, it will recover your costs in addition to its own.

All insurers are not the same. When shopping around, it's worth looking at the records of competing firms to evaluate whether they pursue valid subrogation claims; if they do so in a reasonable amount of time; if they keep their accountholders posted as the case proceeds; and if they then process successfully won reimbursements right away so that you can get your losses back and move on with your life. If, on the other hand, an insurer has a reputation of paying out claims that aren't its responsibility and then covering its profitability by raising your premiums, even attractive rates won't outweigh the eventual headache.