Subrogation is an idea that's understood in legal and insurance circles but often not by the policyholders they represent. Rather than leave it to the professionals, it would be in your self-interest to know an overview of how it works. The more information you have, the more likely an insurance lawsuit will work out in your favor.

Any insurance policy you own is a promise that, if something bad occurs, the firm that covers the policy will make good in a timely manner. If your vehicle is rear-ended, insurance adjusters (and the courts, when necessary) decide who was at fault and that party's insurance covers the damages.

But since ascertaining who is financially responsible for services or repairs is typically a confusing affair – and time spent waiting often compounds the damage to the policyholder – insurance firms in many cases opt to pay up front and assign blame afterward. They then need a path to recover the costs if, once the situation is fully assessed, they weren't responsible for the payout.

Can You Give an Example?

You arrive at the hospital with a sliced-open finger. You give the receptionist your medical insurance card and he takes down your policy information. You get taken care of and your insurance company is billed for the medical care. But the next day, when you get to work – where the accident occurred – your boss hands you workers compensation forms to file. Your company's workers comp policy is in fact responsible for the expenses, not your medical insurance policy. It has a vested interest in getting that money back somehow.

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 insurance firms 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 self or property. But under subrogation law, your insurance company is given 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.

How Does This Affect Individuals?

For starters, if you have a deductible, your insurance company wasn't the only one who had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – to be precise, $1,000. If your insurance company is unconcerned with pursuing subrogation even when it is entitled, it might choose to recoup its costs by boosting your premiums. On the other hand, if it knows which cases it is owed and pursues them enthusiastically, 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 50 percent responsible), you'll typically get $500 back, based on the laws in most states.

In addition, if the total price 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 local attorney Lacey, WA, successfully press a subrogation case, it will recover your expenses as well as its own.

All insurers are not created equal. When shopping around, it's worth comparing the records of competing companies to evaluate if they pursue legitimate subrogation claims; if they do so with some expediency; if they keep their customers posted as the case proceeds; and if they then process successfully won reimbursements right away so that you can get your deductible back and move on with your life. If, on the other hand, an insurance agency has a record of honoring claims that aren't its responsibility and then protecting its bottom line by raising your premiums, even attractive rates won't outweigh the eventual headache.