Subrogation is an idea that's well-known among insurance and legal firms but often not by the policyholders who hire them. Rather than leave it to the professionals, it is in your benefit to understand an overview of how it works. The more information you have about it, the better decisions you can make with regard to your insurance company.

Any insurance policy you own is a commitment that, if something bad happens to you, the business on the other end of the policy will make good in a timely fashion. If your home burns down, your property insurance agrees to pay you or facilitate the repairs, subject to state property damage laws.

But since figuring out who is financially accountable for services or repairs is regularly a heavily involved affair – and time spent waiting often compounds the damage to the victim – insurance companies in many cases decide to pay up front and figure out the blame afterward. They then need a way to recover the costs if, ultimately, they weren't actually in charge of the payout.

Let's Look at an Example

You arrive at the hospital with a deeply cut finger. You hand the nurse your medical insurance card and he records your plan information. You get stitched up and your insurer gets an invoice for the expenses. But the next afternoon, when you arrive at your place of employment – where the injury happened – you are given workers compensation paperwork to file. Your company's workers comp policy is in fact responsible for the costs, not your medical insurance policy. It has a vested interest in getting that money back somehow.

How Does Subrogation Work?

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 to your person 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 originally due to you, because it has covered the amount already.

Why Should I Care?

For one thing, if you have a deductible, your insurer 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 the tune of $1,000. If your insurance company is unconcerned with pursuing subrogation even when it is entitled, it might choose to get back its costs by boosting your premiums and call it a day. On the other hand, if it has a competent legal team and goes after 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 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, based on the laws in most states.

Moreover, 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 criminal defense law firm Pleasant Grove UT, successfully press a subrogation case, it will recover your costs in addition to its own.

All insurers are not created equal. When shopping around, it's worth scrutinizing the records of competing companies to evaluate if they pursue legitimate subrogation claims; if they do so quickly; if they keep their policyholders apprised 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 insurance agency has a reputation of paying out claims that aren't its responsibility and then covering its bottom line by raising your premiums, you should keep looking.