Subrogation is a term that's well-known among insurance and legal professionals but sometimes not by the policyholders who hire them. Even if you've never heard the word before, it is in your benefit to comprehend an overview of how it works. The more information you have, the more likely it is that an insurance lawsuit will work out favorably.

Every insurance policy you hold is an assurance that, if something bad occurs, the insurer of the policy will make good in one way or another without unreasonable delay. If you get injured while you're on the clock, for example, your employer's workers compensation insurance agrees to pay 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 heavily involved affair – and time spent waiting often increases the damage to the victim – insurance companies often decide to pay up front and assign blame afterward. They then need a path to regain the costs if, when all is said and done, they weren't actually responsible for the expense.

Let's Look at an Example

Your bedroom catches fire and causes $10,000 in house damages. Luckily, you have property insurance and it takes care of the repair expenses. However, the insurance investigator discovers that an electrician had installed some faulty wiring, and there is reason to believe that a judge would find him accountable for the damages. The home has already been repaired in the name of expediency, but your insurance agency is out ten grand. What does the agency do next?

How Subrogation Works

This is where subrogation comes in. It is the method that an insurance company uses to claim payment 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. Normally, only you can sue for damages 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 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 – to the tune of $1,000. If your insurer is lax about bringing subrogation cases to court, it might choose to get back its costs by boosting your premiums. On the other hand, if it has a capable legal team and pursues those cases aggressively, it is acting both in its own interests and in yours. If all ten grand 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 at fault), you'll typically get $500 back, depending on the laws in your state.

In addition, if the total loss 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 legal counsel salem ut, pursue subrogation and wins, it will recover your expenses in addition to its own.

All insurance companies are not the same. When comparing, it's worth examining the reputations of competing companies to find out whether they pursue winnable subrogation claims; if they resolve those claims quickly; if they keep their clients apprised as the case proceeds; 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 insurance firm has a reputation of paying out claims that aren't its responsibility and then protecting its income by raising your premiums, even attractive rates won't outweigh the eventual headache.