Subrogation is an idea that's understood in legal and insurance circles but sometimes not by the people they represent. Even if you've never heard the word before, it would be in your benefit to understand an overview of how it works. The more information you have, the better decisions you can make about your insurance company.

An insurance policy you hold is an assurance that, if something bad occurs, the insurer of the policy will make good in one way or another in a timely fashion. If a hailstorm damages your property, your property insurance steps in 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 sometimes a tedious, lengthy affair – and time spent waiting sometimes adds to the damage to the policyholder – insurance firms usually decide to pay up front and assign blame after the fact. They then need a mechanism to get back the costs if, once the situation is fully assessed, they weren't responsible for the payout.

Can You Give an Example?

Your living room catches fire and causes $10,000 in home damages. Luckily, you have property insurance and it takes care of the repair expenses. However, in its investigation it discovers that an electrician had installed some faulty wiring, and there is a decent chance 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 payment when it pays out a claim that turned out not to be its responsibility. Some insurance firms 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 extended some of your rights in exchange for having taken care of the damages. It can go after the money originally due to you, because it has covered the amount already.

Why Does This Matter to Me?

For a start, if your insurance policy stipulated 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 timid on any subrogation case it might not win, it might opt to recover its expenses by raising your premiums and call it a day. On the other hand, if it has a knowledgeable legal team and pursues those cases efficiently, it is doing you a favor as well as itself. If all is recovered, you will get your full $1,000 deductible back. If it recovers half (for instance, in a case where you are found one-half culpable), you'll typically get half your deductible back, depending on your state laws.

In addition, if the total cost of an accident is more than your maximum coverage amount, you could be in for a stiff bill. If your insurance company or its property damage lawyers, such as wrongful death lawyer Tacoma, Wa, successfully press a subrogation case, it will recover your costs as well as its own.

All insurers are not the same. When shopping around, it's worth comparing the reputations of competing companies to evaluate if they pursue winnable subrogation claims; if they do so without dragging their feet; if they keep their customers informed as the case goes on; and if they then process successfully won reimbursements right away so that you can get your funding back and move on with your life. If, on the other hand, an insurer has a record of honoring claims that aren't its responsibility and then safeguarding its profit margin by raising your premiums, even attractive rates won't outweigh the eventual headache.