Subrogation is a term that's understood among insurance and legal companies but rarely by the policyholders they represent. Rather than leave it to the professionals, it would be in your self-interest to understand an overview of how it works. The more you know, the better decisions you can make about your insurance policy.

An insurance policy you own is an assurance that, if something bad happens to you, the firm that insures the policy will make good in one way or another in a timely manner. If you get injured while you're on the clock, your company's workers compensation insurance pays out for medical services. Employment lawyers handle the details; you just get fixed up.

But since determining who is financially responsible for services or repairs is regularly a time-consuming affair – and delay sometimes increases the damage to the victim – insurance firms often opt to pay up front and assign blame afterward. They then need a means to recoup the costs if, in the end, they weren't actually in charge of the expense.

Can You Give an Example?

Your bedroom catches fire and causes $10,000 in house damages. Fortunately, you have property insurance and it pays for the repairs. However, the assessor assigned to your case discovers that an electrician had installed some faulty wiring, and there is a decent chance that a judge would find him to blame for the damages. You already have your money, but your insurance firm is out ten grand. What does the firm do next?

How Subrogation Works

This is where subrogation comes in. It is the process that an insurance company uses to claim payment when it pays out a claim that turned out not to be its responsibility. 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. Ordinarily, only you can sue for damages done to your self or property. But under subrogation law, your insurer is given some of your rights in exchange for making good on 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 have a stake in the outcome as well – 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 expenses by upping your premiums. On the other hand, if it has a competent legal team and pursues them enthusiastically, it is acting both in its own interests and in yours. 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 culpable), you'll typically get half your deductible back, based on the laws in most states.

Moreover, if the total loss of an accident is over your maximum coverage amount, you may have had to pay the difference, which can be extremely costly. If your insurance company or its property damage lawyers, such as car accident attorney Norcross GA, pursue subrogation and wins, it will recover your losses as well as its own.

All insurance companies are not the same. When comparing, it's worth looking at the reputations of competing agencies to evaluate whether they pursue winnable subrogation claims; if they resolve those claims in a reasonable amount of time; if they keep their customers informed 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 company has a reputation of honoring claims that aren't its responsibility and then protecting its bottom line by raising your premiums, even attractive rates won't outweigh the eventual headache.