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

Any insurance policy you own is a promise that, if something bad happens to you, the company that insures the policy will make restitutions in one way or another in a timely fashion. If your home is burglarized, your property insurance agrees to repay you or pay for the repairs, subject to state property damage laws.

But since determining who is financially responsible for services or repairs is often a tedious, lengthy affair – and delay sometimes increases the damage to the policyholder – insurance companies in many cases opt to pay up front and assign blame afterward. They then need a way to recover the costs if, when all is said and done, they weren't actually responsible for the payout.

For Example

You are in a traffic-light accident. Another car collided with yours. Police are called, you exchange insurance information, and you go on your way. You have comprehensive insurance that pays for the repairs right away. Later it's determined that the other driver was at fault and her insurance policy should have paid for the repair of your auto. How does your company get its money back?

How Does Subrogation Work?

This is where subrogation comes in. It is the way 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. Normally, only you can sue for damages done to your person or property. But under subrogation law, your insurer is extended some of your rights 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 one thing, if you have a deductible, your insurer wasn't the only one 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 lax about bringing subrogation cases to court, it might choose to recover its losses by ballooning your premiums. On the other hand, if it has a knowledgeable legal team and goes after those cases enthusiastically, it is acting both in its own interests and in yours. If all $10,000 is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found 50 percent to blame), you'll typically get $500 back, depending on the laws in your state.

Additionally, if the total expense 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 car accident lawyer Tacoma WA, successfully press a subrogation case, it will recover your costs as well as its own.

All insurance agencies are not created equal. When shopping around, it's worth looking at the records of competing firms to find out if they pursue valid subrogation claims; if they resolve those claims fast; if they keep their clients updated as the case goes on; and if they then process successfully won reimbursements quickly so that you can get your money back and move on with your life. If, instead, an insurance firm has a record of paying out claims that aren't its responsibility and then covering its income by raising your premiums, even attractive rates won't outweigh the eventual headache.