Which term describes the process of the insurer seeking reimbursement from a negligent third party after paying a claim?

Which term describes the process of the insurer seeking reimbursement from a negligent third party after paying a claim?

• A. Other insurance
• B. Subrogation
• C. Coinsurance
• D. Valuation

Answer: (B)

When an insurer pays a claim, it can step into the insured’s shoes to pursue recovery from the party responsible for the loss. This is subrogation: the insurer pays the claim, then seeks reimbursement from the negligent third party (or that party’s insurer) to recoup what was paid. This prevents the insured from bearing the loss twice and helps keep premiums fair by having the responsible party ultimately cover the costs. For example, if another driver’s negligence caused the loss and the insurer pays the claim to the insured, the insurer can sue or negotiate with the at-fault driver to recover those funds. The other terms don’t describe this process: other insurance deals with multiple policies; coinsurance is sharing loss between insured and insurer; valuation is about determining the loss amount. Subrogation is the act of pursuing that reimbursement from the third party.

When an insurer pays a claim, it can step into the insured’s shoes to pursue recovery from the party responsible for the loss. This is subrogation: the insurer pays the claim, then seeks reimbursement from the negligent third party (or that party’s insurer) to recoup what was paid. This prevents the insured from bearing the loss twice and helps keep premiums fair by having the responsible party ultimately cover the costs. For example, if another driver’s negligence caused the loss and the insurer pays the claim to the insured, the insurer can sue or negotiate with the at-fault driver to recover those funds. The other terms don’t describe this process: other insurance deals with multiple policies; coinsurance is sharing loss between insured and insurer; valuation is about determining the loss amount. Subrogation is the act of pursuing that reimbursement from the third party.