Subrogation is an idea that's understood among legal and insurance professionals but rarely by the policyholders who hire them. Even if you've never heard the word before, it would be to your advantage to understand the nuances of how it works. The more knowledgeable you are about it, the better decisions you can make about your insurance company.

Every insurance policy you own is a promise that, if something bad occurs, the firm that insures the policy will make restitutions in a timely fashion. If a blizzard damages your real estate, your property insurance steps in to repay you or pay for the repairs, subject to state property damage laws.

But since ascertaining who is financially responsible for services or repairs is sometimes a tedious, lengthy affair – and delay often adds to the damage to the victim – insurance firms usually decide to pay up front and figure out the blame afterward. They then need a method to get back the costs if, once the situation is fully assessed, they weren't actually in charge of the expense.

For Example

Your kitchen catches fire and causes $10,000 in home damages. Happily, you have property insurance and it pays for the repairs. However, the assessor assigned to your case discovers that an electrician had installed some faulty wiring, and there is a decent chance that a judge would find him accountable for the damages. You already have your money, but your insurance agency is out ten grand. What does the agency do next?

How Does Subrogation Work?

This is where subrogation comes in. It is the process that an insurance company uses to claim payment 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. Usually, only you can sue for damages done to your person or property. But under subrogation law, your insurance company is extended some of your rights 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 Me?

For a start, 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 – namely, $1,000. If your insurer is lax about bringing subrogation cases to court, it might opt to recoup its costs by ballooning your premiums and call it a day. On the other hand, if it has a proficient legal team and pursues them 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 50 percent at fault), you'll typically get half your deductible back, depending on your state laws.

In addition, 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 lawyers for car accidents Tacoma WA, successfully press a subrogation case, it will recover your costs as well as its own.

All insurance agencies are not created equal. When comparing, it's worth contrasting the reputations of competing agencies to find out whether they pursue winnable subrogation claims; if they do so quickly; if they keep their policyholders informed as the case goes on; and if they then process successfully won reimbursements right away so that you can get your money back and move on with your life. If, on the other hand, an insurance agency has a reputation of paying out claims that aren't its responsibility and then covering its profitability by raising your premiums, even attractive rates won't outweigh the eventual headache.