Subrogation is a term that's well-known among insurance and legal companies but sometimes not by the customers who employ them. Even if it sounds complicated, it would be in your self-interest to understand the nuances of how it works. The more knowledgeable you are about it, the more likely it is that relevant proceedings will work out in your favor.

An insurance policy you hold is a promise that, if something bad happens to you, the company on the other end of the policy will make restitutions in a timely manner. If you get an injury on the job, your company's workers compensation insurance pays out 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 often a confusing affair – and delay often compounds the damage to the victim – insurance companies in many cases decide to pay up front and assign blame afterward. They then need a path to recoup the costs if, ultimately, they weren't actually in charge of the expense.

Can You Give an Example?

Your kitchen catches fire and causes $10,000 in house damages. Fortunately, you have property insurance and it pays for the repairs. However, in its investigation it finds out that an electrician had installed some faulty wiring, and there is a reasonable possibility that a judge would find him to blame for the damages. The house has already been repaired in the name of expediency, but your insurance firm is out $10,000. What does the firm do next?

How Subrogation Works

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. Normally, only you can sue for damages to your person or property. But under subrogation law, your insurance company is considered to have some of your rights in exchange 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.

Why Does This Matter to Me?

For one thing, if your insurance policy stipulated a deductible, your insurance company 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 insurer is timid on any subrogation case it might not win, it might opt to recoup its costs by increasing your premiums. On the other hand, if it knows which cases it is owed and pursues 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.

In addition, if the total loss of an accident is more than your maximum coverage amount, you may have had to pay the difference. If your insurance company or its property damage lawyers, such as child custody rights Henderson NV, pursue subrogation and wins, it will recover your losses in addition to its own.

All insurance companies are not the same. When shopping around, it's worth weighing the reputations of competing firms to find out whether they pursue legitimate subrogation claims; if they do so without dragging their feet; if they keep their policyholders posted 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 insurer has a record of honoring claims that aren't its responsibility and then safeguarding its bottom line by raising your premiums, even attractive rates won't outweigh the eventual headache.