Subrogation is a term that's understood among legal and insurance firms but sometimes not by the customers they represent. Rather than leave it to the professionals, it would be in your benefit to understand an overview of how it works. The more information you have about it, the better decisions you can make about your insurance policy.

Every insurance policy you have is a promise that, if something bad occurs, the business on the other end of the policy will make restitutions in a timely manner. If your vehicle is rear-ended, insurance adjusters (and police, when necessary) determine who was at fault and that party's insurance covers the damages.

But since determining who is financially responsible for services or repairs is often a tedious, lengthy affair – and time spent waiting often increases the damage to the victim – insurance companies usually opt to pay up front and assign blame later. They then need a mechanism to recoup the costs if, in the end, they weren't actually in charge of the expense.

Let's Look at an Example

Your kitchen catches fire and causes $10,000 in home damages. Happily, you have property insurance and it takes care of the repair expenses. However, in its investigation it finds out 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 agency is out all that money. What does the agency do next?

How Does Subrogation Work?

This is where subrogation comes in. It is the process that an insurance company uses to claim payment after it has paid for something that should have been paid by some other entity. 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 self 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 originally due to you, because it has covered the amount already.

How Does This Affect the Insured?

For one thing, 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 – to the tune of $1,000. If your insurer is unconcerned with pursuing subrogation even when it is entitled, 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 competent legal team and goes after those cases aggressively, it is acting both in its own interests and in yours. 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 culpable), you'll typically get $500 back, based on the laws in most states.

Additionally, if the total loss of an accident is over your maximum coverage amount, you may have had to pay the difference. If your insurance company or its property damage lawyers, such as criminal law defense lawyer Portland OR, pursue subrogation and wins, it will recover your costs as well as its own.

All insurance companies are not created equal. When comparing, it's worth researching the reputations of competing agencies to evaluate whether they pursue valid subrogation claims; if they do so with some expediency; if they keep their policyholders updated as the case proceeds; and if they then process successfully won reimbursements immediately so that you can get your money back and move on with your life. If, on the other hand, an insurer has a record of honoring claims that aren't its responsibility and then safeguarding its profitability by raising your premiums, you'll feel the sting later.