Subrogation is an idea that's understood among insurance and legal companies but rarely by the people who employ them. Even if it sounds complicated, it is to your advantage to comprehend an overview of how it works. The more information you have about it, the better decisions you can make with regard to your insurance company.

Every insurance policy you have is a commitment that, if something bad occurs, the insurer of the policy will make restitutions without unreasonable delay. If your vehicle is hit, insurance adjusters (and police, when necessary) decide who was to blame and that person's insurance covers the damages.

But since ascertaining who is financially accountable for services or repairs is often a time-consuming affair – and time spent waiting in some cases compounds the damage to the victim – insurance companies in many cases decide to pay up front and assign blame afterward. They then need a mechanism to recover the costs if, ultimately, they weren't responsible for the payout.

Let's Look at an Example

Your stove catches fire and causes $10,000 in home 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 accountable for the loss. The house has already been repaired in the name of expediency, 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 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 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 self or property. But under subrogation law, your insurance company is given some of your rights for having taken care of the damages. It can go after the money originally due to you, because it has covered the amount already.

How Does This Affect Me?

For one thing, if you have a deductible, it wasn't just your insurance company 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 unconcerned with pursuing subrogation even when it is entitled, it might opt to get back its costs by increasing your premiums and call it a day. On the other hand, if it has a knowledgeable legal team and pursues them efficiently, it is acting both in its own interests and in yours. 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 one-half at fault), you'll typically get $500 back, based on the laws in most states.

In addition, if the total cost of an accident is over your maximum coverage amount, you could be in for a stiff bill. If your insurance company or its property damage lawyers, such as business law springville ut, successfully press a subrogation case, it will recover your costs as well as its own.

All insurers are not created equal. When shopping around, it's worth examining the reputations of competing companies to determine whether they pursue winnable subrogation claims; if they do so quickly; if they keep their clients posted as the case proceeds; 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 insurer has a record of paying out claims that aren't its responsibility and then safeguarding its bottom line by raising your premiums, you'll feel the sting later.