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Subrogation is an idea that's understood among insurance and legal firms but rarely by the policyholders they represent. Even if you've never heard the word before, it would be in your self-interest to comprehend the steps of how it works. The more you know about it, the more likely it is that relevant proceedings will work out favorably.

Every insurance policy you hold is an assurance that, if something bad occurs, the business that covers the policy will make restitutions in a timely manner. If a windstorm damages your real estate, your property insurance agrees to remunerate you or facilitate the repairs, subject to state property damage laws.

But since determining who is financially responsible for services or repairs is typically a heavily involved affair – and delay often increases the damage to the victim – insurance companies in many cases opt to pay up front and assign blame afterward. They then need a means to recover the costs if, when all is said and done, they weren't in charge of the payout.

For Example

Your bedroom catches fire and causes $10,000 in house damages. Luckily, you have property insurance and it pays for the repairs. However, the assessor assigned to your case finds out that an electrician had installed some faulty wiring, and there is a decent chance that a judge would find him to blame for the loss. You already have your money, but your insurance agency is out $10,000. What does the agency do next?

How Does Subrogation Work?

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 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 considered to have some of your rights 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.

Why Does This Matter to Me?

For starters, if your insurance policy stipulated a deductible, it wasn't just your insurer who had to pay. In a $10,000 accident with a $1,000 deductible, you have a stake in the outcome as well – namely, $1,000. If your insurance company is timid on any subrogation case it might not win, it might opt to get back its losses by boosting your premiums. 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 is recovered, you will get your full thousand-dollar deductible back. If it recovers half (for instance, in a case where you are found one-half at fault), you'll typically get half your deductible back, depending on the laws in your state.

Moreover, if the total cost 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 work injury lawyer whitewater wi, pursue subrogation and succeeds, it will recover your expenses as well as its own.

All insurers are not created equal. When shopping around, it's worth contrasting the reputations of competing firms to determine whether they pursue legitimate subrogation claims; if they do so quickly; if they keep their policyholders updated as the case goes on; and if they then process successfully won reimbursements immediately so that you can get your deductible back and move on with your life. If, on the other hand, an insurance company has a record of honoring claims that aren't its responsibility and then covering its profitability by raising your premiums, even attractive rates won't outweigh the eventual headache.