Subrogation is an idea that's well-known among legal and insurance companies but often not by the people they represent. Rather than leave it to the professionals, it is in your self-interest to understand 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 a promise that, if something bad happens to you, the insurer of the policy will make restitutions in one way or another without unreasonable delay. If your vehicle is hit, insurance adjusters (and the courts, when necessary) decide who was to blame and that party's insurance covers the damages.

But since determining who is financially accountable for services or repairs is often a confusing affair – and delay in some cases compounds the damage to the victim – insurance companies often opt to pay up front and figure out the blame afterward. They then need a mechanism to recover the costs if, when all is said and done, they weren't in charge of the payout.

Let's Look at an Example

Your electric outlet catches fire and causes $10,000 in home damages. Luckily, you have property insurance and it takes care of the repair expenses. However, the assessor assigned to your case discovers that an electrician had installed some faulty wiring, and there is a decent chance that a judge would find him responsible for the damages. You already have your money, but your insurance agency is out $10,000. What does the agency do next?

How Subrogation Works

This is where subrogation comes in. It is the way 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 person or property. But under subrogation law, your insurer is given some of your rights 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 Policyholders?

For starters, 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 have a stake in the outcome as well – to the tune of $1,000. If your insurance company is lax about bringing subrogation cases to court, it might opt to get back its expenses by ballooning your premiums. On the other hand, if it has a competent legal team and pursues them efficiently, it is doing you a favor as well as itself. If all ten grand 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 culpable), you'll typically get $500 back, based on the laws in most states.

In addition, if the total price 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 family law olympia wa, pursue subrogation and succeeds, it will recover your losses in addition to its own.

All insurers are not the same. When comparing, it's worth measuring the reputations of competing firms to determine whether they pursue valid subrogation claims; if they resolve those claims fast; if they keep their accountholders apprised as the case goes on; and if they then process successfully won reimbursements right away so that you can get your deductible 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 profitability by raising your premiums, you should keep looking.