Subrogation is a concept that's well-known among insurance and legal professionals but rarely by the customers they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it is in your self-interest to comprehend the steps of how it works. The more information you have about it, the better decisions you can make about your insurance policy.

An insurance policy you have is a commitment that, if something bad happens to you, the firm on the other end of the policy will make restitutions in one way or another without unreasonable delay. If you get an injury at work, for example, your company's workers compensation pays out for medical services. Employment lawyers handle the details; you just get fixed up.

But since figuring out who is financially accountable for services or repairs is sometimes a confusing affair – and time spent waiting in some cases compounds the damage to the victim – insurance companies in many cases decide to pay up front and figure out the blame after the fact. They then need a mechanism to recover the costs if, in the end, they weren't in charge of the payout.

Let's Look at an Example

Your garage catches fire and causes $10,000 in home damages. Happily, 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 a decent chance that a judge would find him responsible for the loss. You already have your money, but your insurance agency is out $10,000. What does the agency do next?

How Subrogation Works

This is where subrogation comes in. It is the process that an insurance company uses to claim reimbursement 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. Normally, only you can sue for damages to your person or property. But under subrogation law, your insurance company is given some of your rights for making good on the damages. It can go after the money 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 insurance company wasn't the only one that had to pay. In a $10,000 accident with a $1,000 deductible, you have a stake in the outcome as well – to the tune of $1,000. If your insurance company is lax about bringing subrogation cases to court, it might choose to get back its costs by boosting your premiums and call it a day. On the other hand, if it has a proficient legal team and goes after them efficiently, it is doing you a favor as well as itself. If all 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 expense 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 business law spanish fork ut, successfully press a subrogation case, it will recover your losses in addition to its own.

All insurers are not the same. When comparing, it's worth weighing the records of competing agencies to determine if they pursue winnable subrogation claims; if they resolve those claims fast; if they keep their customers apprised as the case proceeds; and if they then process successfully won reimbursements right away so that you can get your losses back and move on with your life. If, instead, an insurance agency 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.