Subrogation is an idea that's understood in insurance and legal circles but sometimes not by the people they represent. Even if you've never heard the word before, it would be to your advantage to know the steps of how it works. The more you know about it, the better decisions you can make with regard to your insurance company.

Every insurance policy you hold is a promise that, if something bad happens to you, the business that insures the policy will make good in one way or another in a timely fashion. If your home suffers fire damage, for instance, your property insurance steps in to pay you or pay for the repairs, subject to state property damage laws.

But since ascertaining who is financially accountable for services or repairs is usually a tedious, lengthy affair – and delay sometimes compounds the damage to the victim – insurance firms in many cases decide to pay up front and assign blame later. They then need a path to recoup the costs if, when there is time to look at all the facts, they weren't responsible for the payout.

For Example

You head to the hospital with a sliced-open finger. You hand the nurse your health insurance card and he records your coverage details. You get stitches and your insurer gets a bill for the expenses. But the next afternoon, when you clock in at your workplace – where the injury occurred – your boss hands you workers compensation forms to fill out. Your employer's workers comp policy is actually responsible for the expenses, not your health insurance policy. It has a vested interest in getting that money back in some way.

How Subrogation Works

This is where subrogation comes in. It is the process 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. 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 in exchange 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.

Why Do I Need to Know This?

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 unconcerned with pursuing subrogation even when it is entitled, it might opt to recoup its costs by boosting your premiums. On the other hand, if it knows which cases it is owed and pursues them efficiently, it is acting both in its own interests and in yours. If all of the money is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found one-half culpable), you'll typically get half your deductible back, based on the laws in most states.

Moreover, if the total price 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 attorney kemmerer wy, pursue subrogation and wins, it will recover your costs as well as its own.

All insurers are not the same. When shopping around, it's worth comparing the records of competing agencies to evaluate whether they pursue valid subrogation claims; if they do so without dragging their feet; if they keep their clients posted as the case goes on; and if they then process successfully won reimbursements right away so that you can get your funding back and move on with your life. If, on the other hand, an insurer has a reputation of honoring claims that aren't its responsibility and then safeguarding its income by raising your premiums, you should keep looking.