Subrogation is a term that's understood in insurance and legal circles but rarely by the people who employ them. Even if it sounds complicated, it is in your benefit to understand an overview of the process. The more knowledgeable you are, the better decisions you can make about your insurance policy.

Any insurance policy you hold is a commitment that, if something bad occurs, the business that covers the policy will make restitutions in one way or another in a timely manner. If you get injured while working, for example, your employer's workers compensation pays out for medical services. Employment lawyers handle the details; you just get fixed up.

But since ascertaining who is financially accountable for services or repairs is typically a heavily involved affair – and time spent waiting sometimes compounds the damage to the policyholder – insurance firms usually decide to pay up front and assign blame afterward. They then need a means to recover the costs if, once the situation is fully assessed, they weren't actually in charge of the payout.

Can You Give an Example?

Your electric outlet 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 finds out that an electrician had installed some faulty wiring, and there is a decent chance that a judge would find him to blame for the loss. You already have your money, but your insurance company is out $10,000. What does the company do next?

How Does Subrogation Work?

This is where subrogation comes in. It is the way 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. 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 Me?

For one thing, if you have 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 lost some money too – namely, $1,000. If your insurer is unconcerned with pursuing subrogation even when it is entitled, it might choose to recoup its expenses by increasing your premiums. On the other hand, if it knows which cases it is owed and pursues them aggressively, it is doing you a favor as well as itself. 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 accountable), you'll typically get $500 back, based on the laws in most states.

In addition, if the total cost 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 criminal attorney Portland, OR, successfully press a subrogation case, it will recover your costs in addition to its own.

All insurers are not the same. When shopping around, it's worth looking up the reputations of competing agencies to determine whether they pursue winnable subrogation claims; if they do so with some expediency; if they keep their policyholders informed as the case continues; and if they then process successfully won reimbursements quickly so that you can get your deductible back and move on with your life. If, instead, an insurance agency has a reputation of honoring claims that aren't its responsibility and then safeguarding its profitability by raising your premiums, you'll feel the sting later.