Subrogation is an idea that's well-known among insurance and legal professionals but rarely by the policyholders who hire them. Even if it sounds complicated, it is to your advantage to know an overview of how it works. The more you know about it, the better decisions you can make about your insurance policy.

Any insurance policy you have is a commitment that, if something bad occurs, the firm on the other end of the policy will make restitutions in one way or another in a timely manner. If your property burns down, your property insurance agrees to repay you or enable the repairs, subject to state property damage laws.

But since determining who is financially responsible for services or repairs is often a heavily involved affair – and delay sometimes increases the damage to the victim – insurance firms often opt to pay up front and figure out the blame later. They then need a way to recover the costs if, when all the facts are laid out, they weren't actually in charge of the expense.

Can You Give an Example?

You are in a traffic-light accident. Another car crashed into yours. Police are called, you exchange insurance details, and you go on your way. You have comprehensive insurance that pays for the repairs right away. Later it's determined that the other driver was entirely to blame and his insurance policy should have paid for the repair of your car. How does your company get its funds back?

How Subrogation Works

This is where subrogation comes in. It is the way that an insurance company uses to claim reimbursement 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. Usually, only you can sue for damages done to your self or property. But under subrogation law, your insurer is extended some of your rights 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.

How Does This Affect the Insured?

For a start, if you have a deductible, your insurer wasn't the only one 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 timid on any subrogation case it might not win, it might opt to recoup its losses by upping your premiums and call it a day. On the other hand, if it knows which cases it is owed and goes after those cases enthusiastically, it is doing you a favor as well as itself. 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 accountable), you'll typically get half your deductible back, depending on your state laws.

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 child custody mediation Henderson NV, successfully press a subrogation case, it will recover your expenses in addition to its own.

All insurers are not the same. When shopping around, it's worth scrutinizing the reputations of competing agencies to determine if they pursue legitimate subrogation claims; if they do so with some expediency; if they keep their clients updated as the case continues; and if they then process successfully won reimbursements immediately so that you can get your losses 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 safeguarding its profitability by raising your premiums, you'll feel the sting later.