Subrogation is an idea that's understood in legal and insurance circles but often not by the people they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it would be to your advantage to comprehend an overview of how it works. The more information you have about it, the better decisions you can make about your insurance policy.

Every insurance policy you have is a commitment that, if something bad happens to you, the firm on the other end of the policy will make restitutions in one way or another without unreasonable delay. If your vehicle is hit, insurance adjusters (and the courts, when necessary) determine who was to blame and that party's insurance pays out.

But since determining who is financially responsible for services or repairs is often a confusing affair – and time spent waiting in some cases compounds the damage to the policyholder – insurance firms in many cases opt to pay up front and assign blame afterward. They then need a means to get back the costs if, in the end, they weren't in charge of the payout.

For Example

You are in a highway accident. Another car ran into yours. Police are called, you exchange insurance details, and you go on your way. You have comprehensive insurance that pays for the repairs right away. Later it's determined that the other driver was entirely to blame and her insurance policy should have paid for the repair of your vehicle. How does your insurance company get its funds back?

How Subrogation Works

This is where subrogation comes in. It is the method 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. Usually, only you can sue for damages 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 that was originally due to you, because it has covered the amount already.

How Does This Affect Me?

For one thing, if you have a deductible, it wasn't just your insurer 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 insurer is timid on any subrogation case it might not win, it might choose to recover its costs by upping your premiums and call it a day. On the other hand, if it has a competent legal team and goes after 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 $1,000 deductible back. If it recovers half (for instance, in a case where you are found 50 percent responsible), you'll typically get half your deductible back, based on the laws in most states.

Additionally, if the total cost 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 best family law firm Las Vegas NV, successfully press a subrogation case, it will recover your expenses in addition to its own.

All insurance agencies are not created equal. When comparing, it's worth contrasting the reputations of competing companies to evaluate if they pursue valid subrogation claims; if they do so in a reasonable amount of time; if they keep their clients apprised as the case proceeds; and if they then process successfully won reimbursements quickly so that you can get your deductible back and move on with your life. If, instead, an insurer has a record of paying out claims that aren't its responsibility and then safeguarding its income by raising your premiums, even attractive rates won't outweigh the eventual headache.