Subrogation is a term that's well-known among insurance and legal professionals but often not by the customers who employ them. Even if it sounds complicated, it would be in your self-interest to comprehend the nuances of how it works. The more you know, the more likely relevant proceedings will work out in your favor.

Every insurance policy you own is an assurance that, if something bad happens to you, the business that insures the policy will make restitutions in a timely manner. If your home is broken into, your property insurance agrees to remunerate you or pay for the repairs, subject to state property damage laws.

But since figuring out who is financially responsible for services or repairs is regularly a tedious, lengthy affair – and time spent waiting in some cases adds to the damage to the policyholder – insurance companies usually decide to pay up front and assign blame later. They then need a mechanism to recoup the costs if, ultimately, they weren't responsible for the expense.

Let's Look at an Example

You arrive at the hospital with a gouged finger. You give the nurse your medical insurance card and she takes down your policy details. You get taken care of and your insurer gets a bill for the expenses. But on the following morning, when you get to work – where the accident happened – you are given workers compensation paperwork to fill out. Your company's workers comp policy is actually responsible for the bill, not your medical insurance company. The latter has a right to recover its money in some way.

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 insurance firms 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 to your person or property. But under subrogation law, your insurer is considered to have some of your rights for making good on 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, 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 be precise, $1,000. If your insurance company is timid on any subrogation case it might not win, it might choose to recover its expenses by raising your premiums. On the other hand, if it has a competent legal team and pursues those cases enthusiastically, it is doing you a favor as well as itself. 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 responsible), you'll typically get $500 back, based on the laws in most states.

Furthermore, if the total price of an accident is more than your maximum coverage amount, you could be in for a stiff bill. If your insurance company or its property damage lawyers, such as family law 95037, pursue subrogation and wins, it will recover your losses in addition to its own.

All insurers are not created equal. When comparing, it's worth comparing the reputations of competing firms to evaluate whether they pursue legitimate subrogation claims; if they resolve those claims without dragging their feet; if they keep their accountholders advised as the case proceeds; 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, instead, an insurance firm has a reputation of paying out claims that aren't its responsibility and then covering its income by raising your premiums, you should keep looking.