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Subrogation is a concept that's understood among insurance and legal firms but often not by the customers who hire them. Even if it sounds complicated, it is in your self-interest to understand an overview of how it works. The more you know, the better decisions you can make with regard to your insurance company.

Any insurance policy you hold is a commitment that, if something bad occurs, the company on the other end of the policy will make restitutions in one way or another without unreasonable delay. If you get an injury while working, for example, your company's workers compensation picks up the tab for medical services. Employment lawyers handle the details; you just get fixed up.

But since determining who is financially responsible for services or repairs is usually a time-consuming affair – and delay sometimes increases the damage to the policyholder – insurance firms usually opt to pay up front and assign blame later. They then need a mechanism to recoup the costs if, ultimately, they weren't responsible for the payout.

For Example

Your bedroom catches fire and causes $10,000 in home damages. Fortunately, you have property insurance and it pays out your claim in full. However, in its investigation it discovers that an electrician had installed some faulty wiring, and there is reason to believe that a judge would find him to blame for the loss. The home has already been repaired in the name of expediency, but your insurance company is out ten grand. What does the company do next?

How Does Subrogation Work?

This is where subrogation comes in. It is the method that an insurance company uses to claim reimbursement 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 person or property. But under subrogation law, your insurer is given some of your rights for having taken care of the damages. It can go after the money originally due to you, because it has covered the amount already.

How Does This Affect the Insured?

For starters, if you have 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 insurance company is unconcerned with pursuing subrogation even when it is entitled, it might opt to get back its losses by upping your premiums. On the other hand, if it knows which cases it is owed and pursues them efficiently, it is doing you a favor as well as itself. If all of the money 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, depending on your state laws.

Additionally, if the total expense 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 Criminal defense taylorsville ut, pursue subrogation and wins, it will recover your costs in addition to its own.

All insurers are not the same. When shopping around, it's worth weighing the records of competing companies to evaluate whether they pursue valid subrogation claims; if they do so in a reasonable amount of time; if they keep their clients apprised as the case goes on; and if they then process successfully won reimbursements right away so that you can get your money back and move on with your life. If, on the other hand, an insurance company 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.