Subrogation is a concept that's understood in legal and insurance circles but rarely by the customers who employ them. Even if it sounds complicated, it is in your self-interest to know the nuances of how it works. The more you know, the better decisions you can make about your insurance company.

Every insurance policy you have is a promise that, if something bad happens to you, the insurer of the policy will make good in a timely fashion. If your vehicle is hit, insurance adjusters (and the judicial system, when necessary) determine who was to blame and that person's insurance pays out.

But since figuring out who is financially responsible for services or repairs is typically a time-consuming affair – and time spent waiting often adds to the damage to the policyholder – insurance companies usually opt to pay up front and figure out the blame later. They then need a means to regain the costs if, when all is said and done, they weren't responsible for the payout.

Let's Look at an Example

You are in a vehicle accident. Another car ran into yours. The police show up to assess the situation, you exchange insurance details, and you go on your way. You have comprehensive insurance that pays for the repairs right away. Later police tell the insurance companies that the other driver was to blame and her insurance policy should have paid for the repair of your vehicle. How does your insurance company get its money back?

How Does Subrogation Work?

This is where subrogation comes in. It is the process 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 person or property. But under subrogation law, your insurance company is considered to have 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 Policyholders?

For one thing, if your insurance policy stipulated a deductible, your insurance company wasn't the only one that had to pay. In a $10,000 accident with a $1,000 deductible, you have a stake in the outcome as well – to be precise, $1,000. If your insurer is lax about bringing subrogation cases to court, it might choose to recoup its expenses by ballooning your premiums. On the other hand, if it has a competent legal team and goes after those cases efficiently, it is doing you a favor as well as itself. If all $10,000 is recovered, you will get your full thousand-dollar deductible back. If it recovers half (for instance, in a case where you are found one-half at fault), you'll typically get half your deductible back, depending on the laws in your state.

Moreover, if the total cost of an accident is over your maximum coverage amount, you could be in for a stiff bill. If your insurance company or its property damage lawyers, such as car accident lawyer Tacoma WA, pursue subrogation and succeeds, it will recover your expenses as well as its own.

All insurers are not created equal. When shopping around, it's worth contrasting the reputations of competing firms to find out if they pursue winnable subrogation claims; if they resolve those claims 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 money back and move on with your life. If, instead, an insurer has a record of honoring claims that aren't its responsibility and then safeguarding its profitability by raising your premiums, you should keep looking.