Subrogation is a concept that's understood among legal and insurance professionals but rarely by the policyholders they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it is to your advantage to comprehend an overview of how it works. The more knowledgeable you are, the more likely an insurance lawsuit will work out in your favor.

Any insurance policy you own is an assurance that, if something bad occurs, the business that insures the policy will make restitutions without unreasonable delay. If your home burns down, for example, your property insurance steps in to compensate 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 delay often adds to the damage to the policyholder – insurance companies in many cases opt to pay up front and figure out the blame after the fact. They then need a way to get back the costs if, once the situation is fully assessed, they weren't actually responsible for the expense.

Let's Look at an Example

You are in a highway accident. Another car crashed into yours. Police are called, you exchange insurance details, and you go on your way. You have comprehensive insurance and file a repair claim. Later police tell the insurance companies that the other driver was entirely to blame and her insurance should have paid for the repair of your auto. How does your company get its money back?

How Does Subrogation Work?

This is where subrogation comes in. It is the way that an insurance company uses to claim reimbursement 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. Usually, only you can sue for damages done to your person 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 Do I Need to Know This?

For a start, if you have a deductible, your insurer wasn't the only one that had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – namely, $1,000. If your insurance company is timid on any subrogation case it might not win, it might choose to recover its expenses by upping your premiums. On the other hand, if it knows which cases it is owed and pursues those cases efficiently, it is acting both in its own interests and in yours. If all of the money is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found 50 percent to blame), you'll typically get half your deductible back, depending on the laws in your state.

Moreover, if the total cost of an accident is more than your maximum coverage amount, you may have had to pay the difference. If your insurance company or its property damage lawyers, such as personal injury attorney Puyallup WA, successfully press a subrogation case, it will recover your losses in addition to its own.

All insurance agencies are not the same. When comparing, it's worth looking at the records of competing agencies to determine whether they pursue legitimate subrogation claims; if they resolve those claims without delay; if they keep their customers updated as the case continues; and if they then process successfully won reimbursements immediately so that you can get your losses back and move on with your life. If, instead, an insurance agency has a reputation of honoring claims that aren't its responsibility and then covering its profitability by raising your premiums, even attractive rates won't outweigh the eventual headache.