Subrogation is an idea that's understood in insurance and legal circles but sometimes not by the customers who hire them. Rather than leave it to the professionals, it is in your benefit to know the nuances of how it works. The more information you have, the more likely an insurance lawsuit will work out in your favor.

An insurance policy you hold is an assurance that, if something bad occurs, the firm that covers the policy will make good in a timely fashion. If your vehicle is in a fender-bender, insurance adjusters (and police, when necessary) determine who was to blame and that party's insurance covers the damages.

But since determining who is financially responsible for services or repairs is usually a heavily involved affair – and time spent waiting often compounds the damage to the policyholder – insurance companies in many cases decide to pay up front and figure out the blame after the fact. They then need a path to recover the costs if, when all is said and done, they weren't actually in charge of the expense.

For 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 responsible for the loss. You already have your money, but your insurance firm is out ten grand. What does the firm do next?

How Subrogation Works

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 companies 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 person or property. But under subrogation law, your insurer is given 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.

How Does This Affect the Insured?

For a start, if you have a deductible, your insurer wasn't the only one that 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 lax about bringing subrogation cases to court, it might choose to recover its losses by boosting your premiums and call it a day. On the other hand, if it knows which cases it is owed and pursues them aggressively, 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 the laws in your state.

Furthermore, if the total loss of an accident is over your maximum coverage amount, you may have had to pay the difference, which can be extremely spendy. If your insurance company or its property damage lawyers, such as personal injury attorney kemmerer wy, successfully press a subrogation case, it will recover your losses as well as its own.

All insurers are not created equal. When shopping around, it's worth looking at the reputations of competing agencies to find out if they pursue legitimate subrogation claims; if they do so quickly; if they keep their policyholders updated 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 reputation of paying out claims that aren't its responsibility and then protecting its profit margin by raising your premiums, you'll feel the sting later.