Subrogation is a term that's understood in legal and insurance circles but often not by the policyholders they represent. Even if you've never heard the word before, it is in your self-interest to know the steps of how it works. The more information you have, the more likely relevant proceedings will work out favorably.

Every insurance policy you own is an assurance that, if something bad occurs, the company that insures the policy will make restitutions in one way or another without unreasonable delay. If your vehicle is rear-ended, insurance adjusters (and police, when necessary) decide who was at fault and that party's insurance pays out.

But since ascertaining who is financially responsible for services or repairs is typically a confusing affair a€" and delay often adds to the damage to the policyholder a€" insurance companies in many cases decide to pay up front and figure out the blame after the fact. They then need a mechanism to recover the costs if, ultimately, they weren't actually responsible for the payout.

Can You Give an Example?

Your garage catches fire and causes $10,000 in house damages. Luckily, you have property insurance and it pays for the repairs. However, the insurance investigator discovers that an electrician had installed some faulty wiring, and there is reason to believe that a judge would find him accountable for the loss. You already have your money, but your insurance company is out all that money. What does the company do next?

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 companies have in-house property damage lawyers and personal injury attorneys, or a department dedicated to subrogation; others contract with a law firm. Ordinarily, 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.

How Does This Affect Me?

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 a€" to the tune of $1,000. If your insurer is timid on any subrogation case it might not win, it might choose to recover its expenses by boosting your premiums and call it a day. On the other hand, if it has a competent legal team and pursues those cases efficiently, 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 50 percent responsible), you'll typically get half your deductible back, depending on the laws in your state.

In addition, if the total price of an accident is over your maximum coverage amount, you may have had to pay the difference. If your insurance company or its property damage lawyers, such as Divorce law utah county, pursue subrogation and wins, it will recover your losses in addition to its own.

All insurers are not the same. When comparing, it's worth measuring the reputations of competing agencies to determine whether they pursue legitimate subrogation claims; if they resolve those claims in a reasonable amount of time; if they keep their customers apprised as the case proceeds; and if they then process successfully won reimbursements immediately 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 honoring claims that aren't its responsibility and then covering its profit margin by raising your premiums, even attractive rates won't outweigh the eventual headache.