Subrogation is an idea that's well-known among legal and insurance firms but often not by the policyholders who employ them. Even if it sounds complicated, it would be in your benefit to understand the steps of the process. The more information you have, the more likely relevant proceedings will work out in your favor.

Any insurance policy you own is a promise that, if something bad occurs, the insurer of the policy will make good in a timely manner. If a blizzard damages your property, for instance, your property insurance agrees to remunerate you or enable the repairs, subject to state property damage laws.

But since determining who is financially accountable for services or repairs is sometimes a time-consuming affair – and time spent waiting sometimes adds to the damage to the policyholder – insurance firms usually decide to pay up front and assign blame later. They then need a way to get back the costs if, once the situation is fully assessed, they weren't responsible for the expense.

For Example

Your electric outlet catches fire and causes $10,000 in house damages. Fortunately, you have property insurance and it pays for the repairs. However, the assessor assigned to your case discovers that an electrician had installed some faulty wiring, and there is a reasonable possibility that a judge would find him to blame for the damages. You already have your money, but your insurance agency is out all that money. What does the agency do next?

How Subrogation Works

This is where subrogation comes in. It is the method that an insurance company uses to claim payment 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 for making good on the damages. It can go after the money originally due to you, because it has covered the amount already.

How Does This Affect Policyholders?

For one thing, 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 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 recoup its costs by boosting your premiums. On the other hand, if it has a knowledgeable legal team and pursues them efficiently, it is acting both in its own interests and in yours. If all is recovered, you will get your full thousand-dollar deductible back. If it recovers half (for instance, in a case where you are found one-half at fault), you'll typically get $500 back, based on the laws in most states.

Moreover, 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 child custody mediation Henderson NV, pursue subrogation and succeeds, it will recover your losses as well as its own.

All insurers are not created equal. When comparing, it's worth examining the reputations of competing companies to determine if they pursue legitimate subrogation claims; if they resolve those claims fast; if they keep their customers updated as the case goes on; and if they then process successfully won reimbursements immediately so that you can get your money back and move on with your life. If, instead, an insurer has a record of paying out claims that aren't its responsibility and then safeguarding its profitability by raising your premiums, you'll feel the sting later.