Subrogation is a term that's well-known in insurance and legal circles but often not by the policyholders they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it is in your benefit to know an overview of how it works. The more you know about it, the better decisions you can make with regard to your insurance policy.

Every insurance policy you have is an assurance that, if something bad happens to you, the insurer of the policy will make good in a timely manner. If a hailstorm damages your house, your property insurance agrees to remunerate you or pay for the repairs, subject to state property damage laws.

But since determining who is financially accountable for services or repairs is regularly a confusing affair – and time spent waiting often adds to the damage to the victim – insurance firms in many cases decide to pay up front and assign blame later. They then need a mechanism to regain the costs if, when all the facts are laid out, they weren't responsible for the payout.

For Example

You arrive at the emergency room with a gouged finger. You hand the receptionist your health insurance card and he records your policy information. You get taken care of and your insurer gets an invoice for the tab. But on the following afternoon, when you clock in at your place of employment – where the accident occurred – your boss hands you workers compensation forms to file. Your employer's workers comp policy is actually responsible for the hospital trip, not your health insurance. It has a vested interest in getting that money back somehow.

How Does Subrogation Work?

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 to your self or property. But under subrogation law, your insurer is considered to have 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.

Why Does This Matter to Me?

For starters, if your insurance policy stipulated a deductible, it wasn't just your insurer who 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 timid on any subrogation case it might not win, it might opt to recoup its costs by ballooning your premiums. On the other hand, if it knows which cases it is owed and goes after them aggressively, it is acting both in its own interests and in yours. If all of the money is recovered, you will get your full thousand-dollar deductible back. If it recovers half (for instance, in a case where you are found 50 percent responsible), you'll typically get $500 back, depending on the laws in your state.

Additionally, if the total cost 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 car accident attorney Norcross GA, pursue subrogation and wins, it will recover your costs as well as its own.

All insurance companies are not created equal. When comparing, it's worth weighing the records of competing agencies to find out whether they pursue winnable subrogation claims; if they resolve those claims quickly; if they keep their clients posted as the case goes on; and if they then process successfully won reimbursements quickly so that you can get your funding back and move on with your life. If, on the other hand, an insurance agency has a reputation of honoring claims that aren't its responsibility and then covering its income by raising your premiums, you'll feel the sting later.