Subrogation is a term that's well-known among legal and insurance companies but rarely by the policyholders who hire them. Even if you've never heard the word before, it is to your advantage to understand the nuances of how it works. The more information you have, the better decisions you can make with regard to your insurance company.

An insurance policy you hold is a commitment that, if something bad happens to you, the company on the other end of the policy will make good in one way or another in a timely fashion. If your house is burglarized, your property insurance steps in to compensate you or pay for the repairs, subject to state property damage laws.

But since determining who is financially responsible for services or repairs is typically a tedious, lengthy affair – and delay in some cases compounds the damage to the policyholder – insurance companies often opt to pay up front and figure out the blame afterward. They then need a way to recoup the costs if, when there is time to look at all the facts, they weren't actually in charge of the expense.

For Example

Your stove catches fire and causes $10,000 in home damages. Fortunately, you have property insurance and it pays for the repairs. However, the insurance investigator finds out that an electrician had installed some faulty wiring, and there is reason to believe that a judge would find him accountable for the loss. You already have your money, but your insurance agency is out $10,000. What does the agency do next?

How Does Subrogation Work?

This is where subrogation comes in. It is the way 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. Under ordinary circumstances, only you can sue for damages done to your person or property. But under subrogation law, your insurance company is considered to have 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 Individuals?

For a start, 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 insurance company is lax about bringing subrogation cases to court, it might opt to get back its costs by raising your premiums and call it a day. On the other hand, if it has a competent legal team and goes after those cases 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 one-half accountable), you'll typically get half your deductible back, based on the laws in most states.

Additionally, if the total loss of an accident is more than your maximum coverage amount, you could be in for a stiff bill. If your insurance company or its property damage lawyers, such as family law lawyers near me Holladay UT, successfully press a subrogation case, it will recover your losses in addition to its own.

All insurance companies are not the same. When comparing, it's worth researching the records of competing agencies to evaluate whether they pursue winnable subrogation claims; if they resolve those claims with some expediency; if they keep their clients informed as the case proceeds; and if they then process successfully won reimbursements quickly so that you can get your money back and move on with your life. If, on the other hand, an insurer has a record of honoring claims that aren't its responsibility and then protecting its profit margin by raising your premiums, even attractive rates won't outweigh the eventual headache.