Subrogation is a concept that's well-known in legal and insurance circles but sometimes not by the customers they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it would be to your advantage to know the steps of the process. The more you know, the better decisions you can make about your insurance company.

Every insurance policy you hold is an assurance that, if something bad happens to you, the firm that insures the policy will make good in one way or another without unreasonable delay. If your home is burglarized, for instance, your property insurance agrees to remunerate you or pay for the repairs, subject to state property damage laws.

But since determining who is financially accountable for services or repairs is typically a confusing affair – and delay in some cases adds to the damage to the victim – insurance firms in many cases opt to pay up front and figure out the blame later. They then need a path to regain the costs if, ultimately, they weren't actually responsible for the expense.

Let's Look at an Example

Your bedroom catches fire and causes $10,000 in home damages. Happily, 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. You already have your money, but your insurance company is out ten grand. What does the company 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. Usually, only you can sue for damages done to your self or property. But under subrogation law, your insurer is considered to have 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 the Insured?

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 lost some money too – to be precise, $1,000. If your insurance company is lax about bringing subrogation cases to court, it might opt to recoup its costs by ballooning your premiums. On the other hand, if it has a proficient legal team and pursues those cases efficiently, it is acting both in its own interests and in yours. If all ten grand 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.

In addition, if the total price of an accident is more than your maximum coverage amount, you could be in for a stiff bill. If your insurance company or its property damage lawyers, such as divorce law 98501, pursue subrogation and succeeds, it will recover your losses as well as its own.

All insurers are not created equal. When comparing, it's worth weighing the records of competing companies to find out whether they pursue legitimate subrogation claims; if they do so fast; if they keep their policyholders advised 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, on the other hand, an insurance agency has a reputation of honoring claims that aren't its responsibility and then protecting its profitability by raising your premiums, you should keep looking.