What does the term "subrogation" refer to in insurance?

What does the term "subrogation" refer to in insurance?

• A. The transfer of rights that allows the insurer to recover its losses
• B. A method of calculating policy limits
• C. The process of filing a claim
• D. Insurance coverage for property damage

Answer: (A)

Subrogation in insurance is the process whereby an insurance company seeks to recover the amount it has paid out on a claim by pursuing a third party that is responsible for the loss. This transfer of rights occurs after the insurer compensates the insured for their damages. Essentially, once the insurer pays the claim, it acquires the right to "step into the shoes" of the insured to take legal action against the party at fault. This helps the insurer recoup its losses, contributing to keeping premiums lower for policyholders overall. The other options do not accurately describe subrogation. For instance, calculating policy limits and filing a claim are procedural aspects of insurance but do not involve the transfer of rights for recovering payments after a claim has been made. Similarly, insurance coverage for property damage relates to the types of policies offered, rather than the mechanism of recovery the insurer employs after paying a claim.

Subrogation in insurance is the process whereby an insurance company seeks to recover the amount it has paid out on a claim by pursuing a third party that is responsible for the loss. This transfer of rights occurs after the insurer compensates the insured for their damages. Essentially, once the insurer pays the claim, it acquires the right to "step into the shoes" of the insured to take legal action against the party at fault. This helps the insurer recoup its losses, contributing to keeping premiums lower for policyholders overall.

The other options do not accurately describe subrogation. For instance, calculating policy limits and filing a claim are procedural aspects of insurance but do not involve the transfer of rights for recovering payments after a claim has been made. Similarly, insurance coverage for property damage relates to the types of policies offered, rather than the mechanism of recovery the insurer employs after paying a claim.