Subrogation is a concept that's well-known in insurance and legal circles but rarely by the policyholders who hire them. Rather than leave it to the professionals, it is in your benefit to know the nuances of how it works. The more information you have about it, the better decisions you can make with regard to your insurance company.

An insurance policy you own is a commitment that, if something bad happens to you, the firm that insures the policy will make good in one way or another without unreasonable delay. If you get injured on the job, your employer's workers compensation picks up the tab for medical services. Employment lawyers handle the details; you just get fixed up.

But since ascertaining who is financially accountable for services or repairs is often a tedious, lengthy affair – and time spent waiting in some cases compounds the damage to the victim – insurance companies often decide to pay up front and assign blame afterward. They then need a mechanism to recover the costs if, when all the facts are laid out, they weren't actually in charge of the expense.

For Example

Your kitchen catches fire and causes $10,000 in home damages. Luckily, 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 reason to believe that a judge would find him accountable for the damages. You already have your money, but your insurance company is out $10,000. What does the company do next?

How Does Subrogation Work?

This is where subrogation comes in. It is the process 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. Ordinarily, only you can sue for damages to your person or property. But under subrogation law, your insurer is considered to have some of your rights in exchange for making good on the damages. It can go after the money originally due to you, because it has covered the amount already.

Why Should I Care?

For one thing, if you have a deductible, it wasn't just your insurer that had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – to the tune of $1,000. If your insurer is lax about bringing subrogation cases to court, it might choose to recoup its expenses by upping your premiums. On the other hand, if it has a knowledgeable legal team and pursues those cases efficiently, it is doing you a favor as well as itself. If all ten grand is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found 50 percent culpable), you'll typically get half your deductible back, based on the laws in most states.

Furthermore, if the total expense 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 family law eagle, wi, pursue subrogation and wins, it will recover your expenses as well as its own.

All insurers are not the same. When shopping around, it's worth measuring the reputations of competing companies to find out if they pursue valid subrogation claims; if they do so in a reasonable amount of time; if they keep their clients apprised as the case continues; and if they then process successfully won reimbursements quickly so that you can get your money back and move on with your life. If, instead, an insurer has a reputation of paying out claims that aren't its responsibility and then covering its income by raising your premiums, you'll feel the sting later.