Subrogation is a term that's understood in insurance and legal circles but sometimes not by the policyholders they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it would be in your benefit to comprehend the steps of how it works. The more you know about it, the better decisions you can make about your insurance policy.

An insurance policy you hold is a commitment that, if something bad occurs, the insurer of the policy will make restitutions without unreasonable delay. If your vehicle is in a fender-bender, insurance adjusters (and the judicial system, when necessary) determine who was to blame and that party's insurance covers the damages.

But since ascertaining who is financially accountable for services or repairs is typically a tedious, lengthy affair – and time spent waiting sometimes compounds the damage to the policyholder – insurance firms often decide to pay up front and assign blame afterward. They then need a mechanism to get back the costs if, ultimately, they weren't in charge of the payout.

For Example

Your garage catches fire and causes $10,000 in home damages. Happily, you have property insurance and it takes care of the repair expenses. However, the insurance investigator discovers that an electrician had installed some faulty wiring, and there is a decent chance that a judge would find him liable for the loss. You already have your money, but your insurance agency is out all that money. What does the agency do next?

How Subrogation Works

This is where subrogation comes in. It is the method 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. Ordinarily, 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 making good on the damages. It can go after the money originally due to you, because it has covered the amount already.

How Does This Affect Policyholders?

For a start, 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 lost some money too – to the tune of $1,000. If your insurance company is lax about bringing subrogation cases to court, it might opt to recover its expenses by increasing your premiums and call it a day. On the other hand, if it knows which cases it is owed and pursues those cases enthusiastically, it is acting both in its own interests and in yours. If all $10,000 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 culpable), you'll typically get half your deductible back, based on the laws in most states.

Additionally, 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 personal injury law firm Smyrna GA, pursue subrogation and wins, it will recover your expenses as well as its own.

All insurers are not created equal. When comparing, it's worth examining the records of competing firms to evaluate whether they pursue legitimate subrogation claims; if they do so without dragging their feet; if they keep their customers updated as the case continues; and if they then process successfully won reimbursements right away so that you can get your deductible back and move on with your life. If, on the other hand, an insurer has a record of paying out claims that aren't its responsibility and then safeguarding its income by raising your premiums, even attractive rates won't outweigh the eventual headache.

Subrogation is a term that's well-known in legal and insurance circles but sometimes not by the policyholders who hire them. Even if it sounds complicated, it would be to your advantage to comprehend the steps of the process. The more you know about it, the better decisions you can make with regard to your insurance policy.

An insurance policy you hold is a commitment that, if something bad occurs, the insurer of the policy will make restitutions in one way or another without unreasonable delay. If your home is broken into, for instance, your property insurance agrees to repay you or facilitate the repairs, subject to state property damage laws.

But since determining who is financially accountable for services or repairs is regularly a heavily involved affair – and time spent waiting in some cases increases the damage to the policyholder – insurance firms in many cases decide to pay up front and figure out the blame later. They then need a means to get back the costs if, when there is time to look at all the facts, they weren't actually responsible for the expense.

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 that pays for the repairs right away. Later police tell the insurance companies that the other driver was entirely at fault and her insurance should have paid for the repair of your auto. How does your insurance company get its funds back?

How Subrogation Works

This is where subrogation comes in. It is the method 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 done to your self or property. But under subrogation law, your insurer is considered to have 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 Do I Need to Know This?

For a start, if your insurance policy stipulated a deductible, your insurer wasn't the only one who had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – to be precise, $1,000. If your insurance company is lax about bringing subrogation cases to court, it might choose to recoup its expenses by boosting your premiums and call it a day. On the other hand, if it knows which cases it is owed and goes after them aggressively, 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 one-half responsible), you'll typically get half your deductible back, based on the laws in most states.

Additionally, if the total loss 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 child custody law firm boulder city Nv, pursue subrogation and wins, it will recover your costs as well as its own.

All insurance agencies are not the same. When comparing, it's worth looking at the reputations of competing companies to find out if they pursue valid subrogation claims; if they resolve those claims without delay; if they keep their policyholders posted as the case proceeds; 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 insurance agency has a reputation of paying out claims that aren't its responsibility and then covering its profit margin by raising your premiums, you should keep looking.