Subrogation is a term that's understood in insurance and legal circles but rarely by the people who hire them. Even if you've never heard the word before, it is in your self-interest to understand the steps of the process. The more information you have, the better decisions you can make with regard to your insurance company.

An insurance policy you hold is a commitment that, if something bad occurs, the business that insures the policy will make restitutions without unreasonable delay. If your vehicle is hit, insurance adjusters (and police, when necessary) determine who was at fault and that party's insurance pays out.

But since figuring out who is financially responsible for services or repairs is usually a confusing affair – and delay sometimes compounds the damage to the victim – insurance firms often opt to pay up front and figure out the blame later. They then need a path to regain the costs if, in the end, 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 assessor assigned to your case 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. You already have your money, but your insurance company is out all that money. What does the company do next?

How Subrogation Works

This is where subrogation comes in. It is the process 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. Ordinarily, only you can sue for damages to your person or property. But under subrogation law, your insurance company 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.

Why Should I Care?

For starters, if you have a deductible, it wasn't just your insurance company that had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – to the tune of $1,000. If your insurer is lax about bringing subrogation cases to court, it might choose to recover its costs by boosting your premiums. On the other hand, if it knows which cases it is owed 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 thousand-dollar deductible back. If it recovers half (for instance, in a case where you are found 50 percent at fault), you'll typically get half your deductible back, based on the laws in most states.

In addition, if the total expense of an accident is over your maximum coverage amount, you may have had to pay the difference. If your insurance company or its property damage lawyers, such as immigration law firm South Jordon UT, successfully press a subrogation case, it will recover your expenses in addition to its own.

All insurers are not the same. When comparing, it's worth looking up the records of competing agencies to determine if they pursue valid subrogation claims; if they resolve those claims quickly; if they keep their policyholders posted as the case continues; and if they then process successfully won reimbursements quickly so that you can get your money back and move on with your life. If, instead, an insurance agency has a record of paying out claims that aren't its responsibility and then covering its profit margin by raising your premiums, you should keep looking.