Subrogation is an idea that's well-known in legal and insurance circles but often not by the policyholders who hire them. Rather than leave it to the professionals, it is to your advantage to know an overview of how it works. The more you know, the more likely it is that relevant proceedings will work out in your favor.

Every insurance policy you hold is a commitment that, if something bad happens to you, the firm on the other end of the policy will make good without unreasonable delay. If your property is broken into, for instance, your property insurance steps in to repay you or facilitate the repairs, subject to state property damage laws.

But since figuring out who is financially responsible for services or repairs is sometimes a time-consuming affair – and time spent waiting sometimes adds to the damage to the victim – insurance firms usually opt to pay up front and figure out the blame afterward. They then need a mechanism to recoup the costs if, ultimately, they weren't responsible for the payout.

Let's Look at an Example

You are in a vehicle accident. Another car collided with yours. Police are called, you exchange insurance details, and you go on your way. You have comprehensive insurance and file a repair claim. Later it's determined that the other driver was to blame and her insurance should have paid for the repair of your vehicle. How does your insurance company get its money back?

How Does Subrogation Work?

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. Normally, only you can sue for damages done to your self or property. But under subrogation law, your insurer is extended some of your rights in exchange 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 Individuals?

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 the tune of $1,000. If your insurer is unconcerned with pursuing subrogation even when it is entitled, it might choose to recover its expenses by boosting your premiums and call it a day. On the other hand, if it has a knowledgeable legal team and goes after them aggressively, it is doing you a favor as well as itself. If all $10,000 is recovered, you will get your full $1,000 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 cost 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 criminal lawyer Hillsboro, OR, successfully press a subrogation case, it will recover your losses in addition to its own.

All insurers are not the same. When shopping around, it's worth looking at the records of competing agencies to determine whether they pursue legitimate subrogation claims; if they resolve those claims in a reasonable amount of time; if they keep their accountholders apprised as the case continues; and if they then process successfully won reimbursements immediately so that you can get your money back and move on with your life. If, on the other hand, an insurance agency has a reputation of honoring claims that aren't its responsibility and then covering its income by raising your premiums, even attractive rates won't outweigh the eventual headache.