Subrogation is an idea that's well-known among insurance and legal companies 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 in your benefit to comprehend an overview of the process. The more you know about it, the more likely relevant proceedings will work out favorably.

An insurance policy you own is an assurance that, if something bad happens to you, the insurer of the policy will make restitutions without unreasonable delay. If a hailstorm damages your property, for instance, your property insurance steps in to pay you or enable the repairs, subject to state property damage laws.

But since ascertaining who is financially accountable for services or repairs is typically a tedious, lengthy affair – and delay often adds to the damage to the policyholder – insurance firms usually decide to pay up front and assign blame later. They then need a method to recover the costs if, when all the facts are laid out, they weren't in charge of the expense.

Let's Look at an Example

You arrive at the hospital with a sliced-open finger. You give the receptionist your health insurance card and she takes down your plan details. You get taken care of and your insurer is billed for the tab. But the next afternoon, when you clock in at your place of employment – where the accident occurred – your boss hands you workers compensation paperwork to fill out. Your employer's workers comp policy is actually responsible for the hospital visit, not your health insurance. It has a vested interest in getting that money back in some way.

How Does Subrogation Work?

This is where subrogation comes in. It is the way 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. Under ordinary circumstances, only you can sue for damages done to your person or property. But under subrogation law, your insurer is considered to have 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 one thing, if your insurance policy stipulated a deductible, it wasn't just your insurer that 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 insurer is timid on any subrogation case it might not win, it might choose to get back its losses by ballooning your premiums and call it a day. On the other hand, if it has a knowledgeable legal team and pursues those cases aggressively, 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 at fault), you'll typically get $500 back, based on the laws in most states.

Additionally, if the total loss 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 personal injury attorney Bonney Lake WA, pursue subrogation and wins, it will recover your costs in addition to its own.

All insurance agencies are not the same. When comparing, it's worth looking at the reputations of competing companies to determine if they pursue valid subrogation claims; if they resolve those claims with some expediency; if they keep their policyholders apprised as the case goes on; and if they then process successfully won reimbursements quickly so that you can get your deductible 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 covering its income by raising your premiums, you'll feel the sting later.