Subrogation is a term that's understood among insurance and legal companies but sometimes not by the customers they represent. Even if it sounds complicated, it is to your advantage to understand the nuances of the process. The more knowledgeable you are about it, the better decisions you can make about your insurance company.

An insurance policy you own is a promise that, if something bad happens to you, the firm on the other end of the policy will make restitutions in one way or another in a timely fashion. If you get injured at work, your employer's workers compensation insurance pays out for medical services. Employment lawyers handle the details; you just get fixed up.

But since determining who is financially responsible for services or repairs is typically a heavily involved affair – and delay often increases the damage to the policyholder – insurance firms often decide to pay up front and assign blame after the fact. They then need a means to recoup the costs if, once the situation is fully assessed, they weren't responsible for the expense.

For Example

Your kitchen catches fire and causes $10,000 in home damages. Luckily, you have property insurance and it pays for the repairs. However, in its investigation it discovers that an electrician had installed some faulty wiring, and there is reason to believe that a judge would find him responsible for the damages. The house has already been repaired in the name of expediency, but your insurance company is out all that money. What does the company do next?

How Does Subrogation Work?

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

For one thing, if you have a deductible, it wasn't just your insurance company that had to pay. In a $10,000 accident with a $1,000 deductible, you have a stake in the outcome as well – to be precise, $1,000. If your insurer is lax about bringing subrogation cases to court, it might choose to get back its losses by upping your premiums and call it a day. On the other hand, if it has a capable legal team and pursues them enthusiastically, it is acting both in its own interests and in yours. If all ten grand is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found 50 percent at fault), you'll typically get half your deductible back, based on the laws in most states.

Furthermore, 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 child custody help boulder city Nv, pursue subrogation and succeeds, it will recover your costs in addition to its own.

All insurers are not created equal. When shopping around, it's worth weighing the records of competing agencies to determine whether they pursue legitimate subrogation claims; if they resolve those claims quickly; if they keep their policyholders updated as the case proceeds; and if they then process successfully won reimbursements quickly so that you can get your losses back and move on with your life. If, instead, an insurer has a reputation of honoring claims that aren't its responsibility and then covering its profit margin by raising your premiums, even attractive rates won't outweigh the eventual headache.