Subrogation is an idea that's understood in legal and insurance circles but sometimes not by the customers who employ them. If this term has come up when dealing with your insurance agent or a legal proceeding, it would be in your self-interest to understand the steps of the process. The more you know about it, the more likely relevant proceedings will work out in your favor.

Any insurance policy you have is a promise that, if something bad occurs, the insurer of the policy will make restitutions in one way or another without unreasonable delay. If your vehicle is rear-ended, insurance adjusters (and the judicial system, when necessary) decide who was at fault and that party's insurance pays out.

But since figuring out who is financially accountable for services or repairs is usually a confusing affair – and delay sometimes adds to the damage to the victim – insurance companies in many cases opt to pay up front and assign blame later. They then need a way to get back the costs if, when all is said and done, they weren't actually in charge of the payout.

Can You Give an Example?

You go to the emergency room with a sliced-open finger. You hand the receptionist your medical insurance card and he takes down your policy information. You get taken care of and your insurance company gets a bill for the services. But on the following afternoon, when you arrive at your place of employment – where the injury happened – your boss hands you workers compensation forms to turn in. Your company's workers comp policy is actually responsible for the bill, not your medical insurance. The latter has a right to recover its money in some way.

How Does Subrogation Work?

This is where subrogation comes in. It is the process 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. Under ordinary circumstances, only you can sue for damages done to your person or property. But under subrogation law, your insurance company is given some of your rights for having taken care of 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 Policyholders?

For one thing, if you have a deductible, it wasn't just your insurance company who had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – to be precise, $1,000. If your insurer is timid on any subrogation case it might not win, it might opt to recoup its expenses by increasing your premiums. On the other hand, if it knows which cases it is owed and goes after them efficiently, it is doing you a favor as well as itself. If all ten grand is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found one-half accountable), you'll typically get half your deductible back, based on the laws in most states.

In addition, if the total price 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 real estate attorney paddock lake wi, successfully press a subrogation case, it will recover your expenses in addition to its own.

All insurance companies are not the same. When shopping around, it's worth scrutinizing the records of competing agencies to find out whether they pursue valid subrogation claims; if they do so in a reasonable amount of time; if they keep their accountholders apprised as the case continues; and if they then process successfully won reimbursements quickly so that you can get your money back and move on with your life. If, instead, an insurance agency has a reputation of paying out claims that aren't its responsibility and then covering its bottom line by raising your premiums, you'll feel the sting later.