Subrogation is a term that's understood in insurance and legal circles but rarely by the policyholders who hire them. If this term has come up when dealing with your insurance agent or a legal proceeding, it is to your advantage to understand the steps of how it works. The more information you have, the better decisions you can make with regard to your insurance company.

Any insurance policy you hold is an assurance that, if something bad occurs, the insurer of the policy will make restitutions in one way or another in a timely manner. If you get an injury while you're on the clock, for example, your employer's workers compensation agrees to pay for medical services. Employment lawyers handle the details; you just get fixed up.

But since figuring out who is financially accountable for services or repairs is usually a confusing affair – and delay sometimes increases the damage to the policyholder – insurance firms usually decide to pay up front and assign blame afterward. They then need a mechanism to get back the costs if, ultimately, they weren't in charge of the expense.

Let's Look at an Example

Your bedroom catches fire and causes $10,000 in house damages. Fortunately, you have property insurance and it pays out your claim in full. However, the insurance investigator discovers that an electrician had installed some faulty wiring, and there is reason to believe that a judge would find him responsible for the damages. The home has already been fixed up in the name of expediency, but your insurance firm is out ten grand. What does the firm do next?

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. Under ordinary circumstances, only you can sue for damages to your self or property. But under subrogation law, your insurer is extended 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 Policyholders?

For a start, if your insurance policy stipulated a deductible, it wasn't just your insurer that had to pay. In a $10,000 accident with a $1,000 deductible, you have a stake in the outcome as well – namely, $1,000. If your insurance company is unconcerned with pursuing subrogation even when it is entitled, it might choose to recover its expenses by increasing your premiums and call it a day. On the other hand, if it has a competent legal team and pursues those cases aggressively, it is acting both in its own interests and in yours. If all is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found one-half at fault), you'll typically get $500 back, depending on your state laws.

In addition, if the total cost 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 getting a divorce with kids Lindon ut, successfully press a subrogation case, it will recover your losses in addition to its own.

All insurance companies are not the same. When shopping around, it's worth weighing the reputations of competing firms to determine whether they pursue valid subrogation claims; if they resolve those claims without dragging their feet; if they keep their customers informed as the case goes on; and if they then process successfully won reimbursements right away so that you can get your deductible back and move on with your life. If, on the other hand, an insurance agency has a record of honoring claims that aren't its responsibility and then safeguarding its profit margin by raising your premiums, you'll feel the sting later.