Subrogation is a term that's well-known in insurance and legal circles but sometimes not by the customers they represent. Even if you've never heard the word before, it would be in your benefit to know the steps of how it works. The more knowledgeable you are, the more likely it is that relevant proceedings will work out favorably.

An insurance policy you have is a commitment that, if something bad occurs, the firm that covers the policy will make good in a timely manner. If your home is robbed, your property insurance steps in to remunerate you or facilitate the repairs, subject to state property damage laws.

But since ascertaining who is financially responsible for services or repairs is usually a time-consuming affair – and delay in some cases compounds the damage to the victim – insurance firms usually decide to pay up front and figure out the blame after the fact. They then need a method to recover the costs if, ultimately, they weren't actually in charge of the payout.

Can You Give an Example?

You arrive at the hospital with a deeply cut finger. You give the receptionist your health insurance card and she writes down your plan information. You get stitched up and your insurance company is billed for the services. But the next afternoon, when you get to your place of employment – where the injury happened – your boss hands you workers compensation paperwork to file. Your company's workers comp policy is actually responsible for the payout, not your health insurance. The latter has a right to recover its money somehow.

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 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 to your person or property. But under subrogation law, your insurance company is given some of your rights in exchange for having taken care of 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, your insurance company 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 recoup its expenses by increasing 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 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 accountable), you'll typically get $500 back, depending on the laws in your state.

Additionally, if the total loss of an accident is more than your maximum coverage amount, you may have had to pay the difference. If your insurance company or its property damage lawyers, such as criminal defense law firm Pleasant Grove UT, pursue subrogation and succeeds, it will recover your expenses in addition to its own.

All insurers are not the same. When comparing, it's worth contrasting the reputations of competing companies to determine if they pursue winnable subrogation claims; if they do so fast; if they keep their policyholders informed as the case continues; and if they then process successfully won reimbursements quickly so that you can get your deductible back and move on with your life. If, instead, an insurance company has a reputation of honoring claims that aren't its responsibility and then safeguarding its bottom line by raising your premiums, you'll feel the sting later.