Subrogation is a concept that's well-known among insurance and legal companies but often not by the policyholders they represent. Even if it sounds complicated, it would be to your advantage to understand the steps of the process. The more information you have about it, the better decisions you can make about your insurance company.

Any insurance policy you hold is a commitment that, if something bad happens to you, the business on the other end of the policy will make restitutions in one way or another 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 tedious, lengthy affair – and time spent waiting in some cases compounds the damage to the victim – insurance companies in many cases opt to pay up front and figure out the blame afterward. They then need a mechanism to recoup the costs if, when there is time to look at all the facts, they weren't in charge of the payout.

Let's Look at an Example

You are in a car accident. Another car ran into yours. Police are called, you exchange insurance details, and you go on your way. You have comprehensive insurance and file a repair claim. Later police tell the insurance companies that the other driver was entirely at fault and her insurance policy should have paid for the repair of your vehicle. How does your company get its money back?

How Does Subrogation Work?

This is where subrogation comes in. It is the process 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 to your self 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 that was originally due to you, because it has covered the amount already.

How Does This Affect the Insured?

For starters, if your insurance policy stipulated a deductible, your insurer wasn't the only one 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 insurer is lax about bringing subrogation cases to court, it might choose to recover its losses by boosting your premiums. On the other hand, if it knows which cases it is owed and goes after them enthusiastically, it is doing you a favor as well as itself. 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 50 percent accountable), you'll typically get half your deductible back, based on the laws in most states.

Additionally, 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 personal injury lawyer Tacoma Wa, successfully press a subrogation case, it will recover your expenses in addition to its own.

All insurance companies are not created equal. When comparing, it's worth looking at the reputations of competing companies to determine if they pursue winnable subrogation claims; if they do so without dragging their feet; if they keep their policyholders informed 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, instead, an insurer has a record of honoring claims that aren't its responsibility and then protecting its profitability by raising your premiums, you'll feel the sting later.