Subrogation is an idea that's well-known in insurance and legal circles but often not by the people who employ them. Even if you've never heard the word before, it would be in your benefit to understand an overview of the process. The more information you have, the better decisions you can make with regard to your insurance company.

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 without unreasonable delay. If your vehicle is hit, insurance adjusters (and police, when necessary) decide who was to blame and that person's insurance pays out.

But since ascertaining who is financially accountable for services or repairs is usually a tedious, lengthy affair – and delay in some cases adds to the damage to the victim – insurance firms usually opt to pay up front and assign blame after the fact. They then need a path to regain the costs if, ultimately, they weren't actually in charge of the payout.

Let's Look at an Example

You rush into the hospital with a gouged finger. You hand the receptionist your health insurance card and he takes down your plan details. You get taken care of and your insurer gets an invoice for the medical care. But on the following afternoon, when you clock in at your place of employment – where the accident happened – your boss hands you workers compensation forms to turn in. Your workers comp policy is in fact responsible for the hospital visit, not your health insurance company. It has a vested interest in getting that money back somehow.

How Subrogation Works

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 companies 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 person or property. But under subrogation law, your insurer is given some of your rights in exchange 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 starters, if your insurance policy stipulated a deductible, it wasn't just your insurer that 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 lax about bringing subrogation cases to court, it might opt to recoup its losses by boosting your premiums. On the other hand, if it has a proficient legal team and pursues them aggressively, it is doing you a favor as well as itself. If all is recovered, you will get your full $1,000 deductible back. If it recovers half (for instance, in a case where you are found 50 percent at fault), you'll typically get $500 back, based on the laws in most states.

Additionally, 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 workers comp lawyer Whitewater, WI, successfully press a subrogation case, it will recover your expenses as well as its own.

All insurers are not the same. When shopping around, it's worth comparing the records of competing companies to find out if they pursue legitimate subrogation claims; if they resolve those claims quickly; if they keep their customers updated as the case proceeds; and if they then process successfully won reimbursements quickly so that you can get your deductible back and move on with your life. If, instead, an insurer has a reputation of honoring claims that aren't its responsibility and then protecting its profit margin by raising your premiums, you'll feel the sting later.