Subrogation is an idea that's understood among legal and insurance firms but often not by the policyholders who employ them. Even if it sounds complicated, it is in your benefit to understand the steps of the process. The more knowledgeable you are about it, the better decisions you can make with regard to 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 a timely fashion. If a storm damages your home, for example, your property insurance steps in 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 time-consuming affair – and delay often compounds the damage to the policyholder – insurance companies usually decide to pay up front and assign blame later. They then need a method to regain the costs if, ultimately, they weren't in charge of the expense.

Can You Give an Example?

Your garage 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 liable for the loss. The home has already been fixed up in the name of expediency, but your insurance firm is out all that money. What does the firm do next?

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 companies have in-house property damage lawyers and personal injury attorneys, or a department dedicated to subrogation; others contract with a law firm. Ordinarily, only you can sue for damages done to your self or property. But under subrogation law, your insurer is extended 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.

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 insurer is lax about bringing subrogation cases to court, it might choose to recover its expenses by ballooning your premiums and call it a day. On the other hand, if it has a capable legal team and pursues those cases efficiently, it is acting both in its own interests and in yours. If all ten grand 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 culpable), you'll typically get half your deductible back, based on the laws in most states.

Moreover, if the total expense 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 personal injury attorney in Puyallup, successfully press a subrogation case, it will recover your costs as well as its own.

All insurers are not created equal. When comparing, it's worth researching the reputations of competing agencies to find out if they pursue valid subrogation claims; if they do so in a reasonable amount of time; if they keep their policyholders apprised 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, on the other hand, an insurance firm has a record of paying out claims that aren't its responsibility and then safeguarding its profitability by raising your premiums, even attractive rates won't outweigh the eventual headache.