Subrogation is a term that's understood in insurance and legal circles but often not by the people who employ them. If this term has come up when dealing with your insurance agent or a legal proceeding, it is in your benefit to comprehend the steps of the process. The more you know, the more likely it is that relevant proceedings will work out in your favor.

Any insurance policy you own is an assurance that, if something bad happens to you, the company that insures the policy will make restitutions without unreasonable delay. If your home is broken into, for instance, your property insurance agrees to pay you or facilitate the repairs, subject to state property damage laws.

But since ascertaining who is financially responsible for services or repairs is sometimes a heavily involved affair – and delay in some cases increases the damage to the victim – insurance companies in many cases opt to pay up front and figure out the blame later. They then need a method to recover the costs if, ultimately, they weren't actually in charge of the payout.

Let's Look at an Example

You head to the doctor's office with a deeply cut finger. You hand the receptionist your health insurance card and she records your policy details. You get stitches and your insurance company gets a bill for the medical care. But on the following day, when you arrive at work – where the injury occurred – your boss hands you workers compensation paperwork to fill out. Your company's workers comp policy is actually responsible for the bill, not your health insurance company. The latter has a right to recover its costs somehow.

How Does Subrogation Work?

This is where subrogation comes in. It is the way that an insurance company uses to claim reimbursement 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. Under ordinary circumstances, only you can sue for damages done to your self or property. But under subrogation law, your insurance company is considered to have some of your rights in exchange 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 Do I Need to Know This?

For starters, if your insurance policy stipulated a deductible, it wasn't just your insurance company who had to pay. In a $10,000 accident with a $1,000 deductible, you have a stake in the outcome as well – to the tune of $1,000. If your insurance company is timid on any subrogation case it might not win, it might choose to recover its losses by increasing your premiums and call it a day. On the other hand, if it knows which cases it is owed and goes after those cases enthusiastically, it is acting both in its own interests and in yours. If all $10,000 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 accountable), you'll typically get $500 back, depending on your state laws.

Furthermore, if the total price of an accident is over your maximum coverage amount, you may have had to pay the difference, which can be extremely expensive. If your insurance company or its property damage lawyers, such as real estate law Williams Bay, WI, successfully press a subrogation case, it will recover your losses in addition to its own.

All insurers are not the same. When shopping around, it's worth looking up the reputations of competing agencies to determine if they pursue legitimate subrogation claims; if they do so fast; 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 deductible 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 profit margin by raising your premiums, even attractive rates won't outweigh the eventual headache.