Subrogation is an idea that's well-known among insurance and legal professionals but often not by the policyholders who hire them. Even if you've never heard the word before, it would be in your self-interest to comprehend the steps of how it works. The more information you have, the better decisions you can make about your insurance policy.

Every insurance policy you own is a promise that, if something bad happens to you, the insurer of the policy will make good in one way or another in a timely manner. If your house is broken into, for instance, your property insurance agrees to compensate you or facilitate the repairs, subject to state property damage laws.

But since determining who is financially accountable for services or repairs is often a tedious, lengthy affair – and time spent waiting often increases the damage to the policyholder – insurance firms often opt to pay up front and assign blame afterward. They then need a mechanism to recoup the costs if, ultimately, they weren't actually in charge of the expense.

Let's Look at an Example

You are in a highway accident. Another car collided with yours. Police are called, 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 entirely at fault and her insurance policy should have paid for the repair of your auto. How does your company get its funds back?

How Does Subrogation Work?

This is where subrogation comes in. It is the process that an insurance company uses to claim reimbursement 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. Under ordinary circumstances, only you can sue for damages done to your self or property. But under subrogation law, your insurer is given some of your rights in exchange 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 Policyholders?

For one thing, if you have a deductible, your insurer wasn't the only one who 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 timid on any subrogation case it might not win, it might choose to get back its losses by raising your premiums and call it a day. On the other hand, if it knows which cases it is owed and pursues them enthusiastically, it is acting both in its own interests and in yours. 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 $500 back, depending on your state laws.

Furthermore, if the total loss of an accident is more than your maximum coverage amount, you may have had to pay the difference, which can be extremely expensive. If your insurance company or its property damage lawyers, such as family law child custody Salt Lake City UT, successfully press a subrogation case, it will recover your losses as well as its own.

All insurance agencies are not created equal. When shopping around, it's worth looking at the reputations of competing agencies to determine whether they pursue legitimate subrogation claims; if they do so with some expediency; if they keep their policyholders 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, instead, an insurer has a record of honoring claims that aren't its responsibility and then protecting its profitability by raising your premiums, you should keep looking.