Subrogation is an idea that's understood in legal and insurance circles but rarely by the policyholders they represent. Even if you've never heard the word before, it is to your advantage to comprehend an overview of the process. The more you know about it, the better decisions you can make about your insurance policy.

Any insurance policy you own is an assurance that, if something bad happens to you, the firm on the other end of the policy will make good in one way or another in a timely manner. If you get injured while you're on the clock, your company's workers compensation picks up the tab for medical services. Employment lawyers handle the details; you just get fixed up.

But since ascertaining who is financially responsible for services or repairs is typically a tedious, lengthy affair – and delay often increases the damage to the policyholder – insurance companies in many cases opt to pay up front and figure out the blame afterward. They then need a path to get back the costs if, in the end, they weren't in charge of the payout.

Let's Look at an Example

You are in a vehicle accident. Another car crashed into yours. The police show up to assess the situation, you exchange insurance information, 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 at fault and his insurance policy should have paid for the repair of your vehicle. How does your insurance company get its money back?

How Subrogation Works

This is where subrogation comes in. It is the way that an insurance company uses to claim reimbursement when it pays out a claim that turned out not to be its responsibility. Some companies have in-house property damage lawyers and personal injury attorneys, or a department dedicated to subrogation; others contract with a law firm. Ordinarily, only you can sue for damages to your self or property. But under subrogation law, your insurer is considered to have 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.

Why Does This Matter to Me?

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 – namely, $1,000. If your insurance company is timid on any subrogation case it might not win, it might opt to get back its costs by upping your premiums. On the other hand, if it has a competent legal team and goes after them aggressively, it is acting both in its own interests and in yours. If all 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 at fault), you'll typically get half your deductible back, depending on the laws in your state.

Moreover, if the total expense 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 workers comp lawyer Paddock Lake, WI, successfully press a subrogation case, it will recover your costs in addition to its own.

All insurers are not the same. When comparing, it's worth looking at the reputations of competing agencies to find out if they pursue winnable subrogation claims; if they resolve those claims in a reasonable amount of time; if they keep their customers apprised as the case goes on; and if they then process successfully won reimbursements quickly so that you can get your funding back and move on with your life. If, instead, an insurance company has a record of paying out claims that aren't its responsibility and then covering its bottom line by raising your premiums, you should keep looking.