Subrogation is an idea that's well-known among legal and insurance firms but often not by the people they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it is to your advantage to understand an overview of the process. The more information you have, the better decisions you can make about your insurance policy.

Any insurance policy you have is a promise that, if something bad occurs, the company on the other end of the policy will make good in one way or another without unreasonable delay. If your vehicle is rear-ended, insurance adjusters (and police, when necessary) determine who was at fault and that person's insurance pays out.

But since figuring out who is financially responsible for services or repairs is sometimes a tedious, lengthy affair – and delay in some cases compounds the damage to the policyholder – insurance companies in many cases opt to pay up front and assign blame afterward. They then need a method to recoup the costs if, ultimately, they weren't actually in charge of the payout.

Let's Look at an Example

You are in a traffic-light 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 and file a repair claim. Later police tell the insurance companies that the other driver was at fault and his insurance policy should have paid for the repair of your vehicle. How does your company get its funds back?

How Subrogation Works

This is where subrogation comes in. It is the way that an insurance company uses to claim reimbursement 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 to your person or property. But under subrogation law, your insurance company is extended 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.

Why Does This Matter to Me?

For a start, 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 – namely, $1,000. If your insurance company is timid on any subrogation case it might not win, it might choose to recover its costs by raising your premiums and call it a day. On the other hand, if it knows which cases it is owed and goes after those cases efficiently, 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 responsible), you'll typically get $500 back, based on the laws in most states.

In addition, 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 divorce law olympia wa, pursue subrogation and succeeds, it will recover your costs as well as its own.

All insurance companies are not the same. When comparing, it's worth looking up the reputations of competing companies to determine whether they pursue winnable subrogation claims; if they resolve those claims fast; if they keep their customers advised as the case continues; and if they then process successfully won reimbursements immediately so that you can get your losses back and move on with your life. If, instead, an insurance firm has a reputation of honoring claims that aren't its responsibility and then protecting its bottom line by raising your premiums, you should keep looking.