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Insurance · Claims and Loss Settlement

What is 'subrogation' in property and casualty insurance?

Reviewed by Jordan Morley, Editorial Lead at 247SimpleTests. Written by the 247SimpleTests Editorial Team from the official source material cited on every question.

Correct answer

The insurer's right, after paying a claim, to pursue recovery from a third party who was responsible for causing the loss, stepping into the insured's legal rights

  1. A The insured paying the insurer back
  2. B A way to increase the policy limit
  3. C A type of deductible
  4. D The insurer's right, after paying a claim, to pursue recovery from a third party who was responsible for causing the loss, stepping into the insured's legal rights

Why this is the answer

Subrogation is the right of an insurer, after it has paid a covered claim to its insured, to step into the insured's shoes and pursue recovery from a third party who was legally responsible for the loss. For example, if another driver damages the insured's property and the insurer pays the claim, the insurer can then seek reimbursement from the at-fault party (or their insurer). Subrogation supports the principle of indemnity by ensuring the responsible party ultimately bears the cost and preventing the insured from collecting twice. The insured typically must not impair the insurer's subrogation rights. Understanding subrogation is standard P&C claims content.
Source: NAIC Model Outline, Subrogation

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About this topic: Claims and Loss Settlement

Claims and loss settlement questions cover the insured's duties after a loss, actual cash value versus replacement cost, the coinsurance formula, deductibles, appraisal and subrogation. This is one of 11 Property Insurance questions on claims and loss settlement, each with a full explanation on a single study page.

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