Subrogation is a term that's understood 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 to your advantage to comprehend an overview of the process. The more you know, the better decisions you can make with regard to your insurance company.

An insurance policy you own is a commitment that, if something bad happens to you, the insurer of the policy will make good in one way or another in a timely manner. If your vehicle is hit, insurance adjusters (and police, when necessary) determine who was at fault and that party's insurance covers the damages.

But since ascertaining who is financially accountable for services or repairs is sometimes a heavily involved affair – and delay in some cases adds to the damage to the policyholder – insurance firms often opt to pay up front and assign blame afterward. They then need a means to regain the costs if, when there is time to look at all the facts, they weren't in charge of the expense.

Let's Look at an Example

You rush into the Instacare with a gouged finger. You hand the nurse your health insurance card and he writes down your plan information. You get stitches and your insurer gets an invoice for the services. But on the following morning, when you clock in at your place of employment – where the accident happened – you are given workers compensation forms to fill out. Your workers comp policy is in fact responsible for the invoice, not your health insurance. It has a vested interest in getting that money back in some way.

How Subrogation Works

This is where subrogation comes in. It is the method 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. Ordinarily, only you can sue for damages done to your self or property. But under subrogation law, your insurer 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.

Why Do I Need to Know This?

For a start, if you have a deductible, your insurer 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 the tune of $1,000. If your insurance company is lax about bringing subrogation cases to court, it might opt to recoup its losses by increasing your premiums. On the other hand, if it knows which cases it is owed and goes after those cases aggressively, 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, based on the laws in most states.

In addition, if the total loss of an accident is over your maximum coverage amount, you may have had to pay the difference, which can be extremely expensive. If your insurance company or its property damage lawyers, such as wrongful death lawyer Bonney Lake, Wa, pursue subrogation and succeeds, it will recover your costs in addition to its own.

All insurance agencies are not created equal. When comparing, 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 apprised as the case continues; and if they then process successfully won reimbursements immediately so that you can get your losses back and move on with your life. If, on the other hand, an insurer has a reputation of honoring claims that aren't its responsibility and then covering its profitability by raising your premiums, you'll feel the sting later.