Subrogation is a term that's understood among insurance and legal companies but rarely by the people they represent. Even if it sounds complicated, it would be in your self-interest to comprehend an overview of how it works. The more knowledgeable you are about it, the more likely it is that relevant proceedings will work out favorably.

Every insurance policy you own is a commitment that, if something bad occurs, the business on the other end of the policy will make good without unreasonable delay. If your vehicle is rear-ended, insurance adjusters (and the judicial system, when necessary) decide who was to blame and that person's insurance pays out.

But since determining who is financially responsible for services or repairs is often a tedious, lengthy affair – and time spent waiting often increases the damage to the victim – insurance firms in many cases decide to pay up front and figure out the blame later. They then need a path to regain the costs if, when all the facts are laid out, they weren't in charge of the expense.

Can You Give an Example?

Your garage catches fire and causes $10,000 in home damages. Luckily, you have property insurance and it takes care of the repair expenses. However, the assessor assigned to your case finds out that an electrician had installed some faulty wiring, and there is reason to believe that a judge would find him responsible for the loss. You already have your money, but your insurance agency is out ten grand. What does the agency do next?

How Does Subrogation Work?

This is where subrogation comes in. It is the way that an insurance company uses to claim payment when it pays out a claim that turned out not to be its responsibility. Some companies have in-house property damage lawyers and personal injury attorneys, or a department dedicated to subrogation; others contract with a law firm. Under ordinary circumstances, only you can sue for damages to your person or property. But under subrogation law, your insurer is considered to have 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 lost some money too – namely, $1,000. If your insurer is unconcerned with pursuing subrogation even when it is entitled, it might choose to recoup its costs by increasing your premiums and call it a day. On the other hand, if it has a capable legal team and pursues those cases aggressively, it is doing you a favor as well as itself. If all of the money is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found one-half to blame), you'll typically get $500 back, depending on the laws in your state.

Moreover, if the total cost of an accident is over your maximum coverage amount, you could be in for a stiff bill. If your insurance company or its property damage lawyers, such as lawyers for car accidents Puyallup WA, pursue subrogation and succeeds, it will recover your expenses in addition to its own.

All insurers are not the same. When shopping around, it's worth contrasting the reputations of competing firms to find out whether they pursue winnable subrogation claims; if they resolve those claims without delay; if they keep their clients advised as the case continues; and if they then process successfully won reimbursements right away so that you can get your deductible 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.