Subrogation is a term that's understood among legal and insurance companies but often not by the policyholders who hire them. Rather than leave it to the professionals, it would be to your advantage to comprehend the steps of how it works. The more you know, the better decisions you can make with regard to your insurance policy.

Any insurance policy you hold is a commitment that, if something bad occurs, the firm that insures the policy will make good without unreasonable delay. If your property burns down, for instance, your property insurance agrees to repay you or facilitate the repairs, subject to state property damage laws.

But since determining who is financially responsible for services or repairs is typically a confusing affair – and delay sometimes adds to the damage to the victim – insurance firms often opt to pay up front and figure out the blame afterward. They then need a means to get back the costs if, ultimately, they weren't in charge of the expense.

For Example

Your bedroom catches fire and causes $10,000 in house damages. Luckily, you have property insurance and it takes care of the repair expenses. However, in its investigation it finds out that an electrician had installed some faulty wiring, and there is reason to believe that a judge would find him responsible for the loss. You already have your money, but your insurance company is out ten grand. What does the company do next?

How Subrogation Works

This is where subrogation comes in. It is the method 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 done to your person or property. But under subrogation law, your insurance company 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.

Why Should I Care?

For a start, if you have 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 – namely, $1,000. If your insurer is unconcerned with pursuing subrogation even when it is entitled, it might opt to recoup its costs 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 doing you a favor as well as itself. 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 to blame), you'll typically get half your deductible back, depending on the laws in your state.

Additionally, if the total price of an accident is more than your maximum coverage amount, you may have had to pay the difference. If your insurance company or its property damage lawyers, such as auto accident lawyer Lithia springs GA, pursue subrogation and succeeds, it will recover your losses as well as its own.

All insurance agencies are not the same. When shopping around, it's worth contrasting the reputations of competing agencies to find out whether they pursue winnable subrogation claims; if they do so in a reasonable amount of time; if they keep their policyholders posted as the case proceeds; and if they then process successfully won reimbursements quickly so that you can get your funding 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 protecting its profitability by raising your premiums, you should keep looking.