What is "subrogation" in the context of insurance?

Prepare for the Waco Title Insurance Test. Study with flashcards and multiple-choice questions. Each question comes with hints and explanations to help you succeed. Get ready for your exam!

Subrogation in the context of insurance refers to the practice of substituting one party's rights or claims with another, typically involving the insurance company stepping into the shoes of the insured after paying a loss. This allows the insurer to pursue recovery from the third party that may have caused the loss. For instance, if an insured person suffers a loss due to another party's negligence and the insurance company compensates the insured, the insurer can then seek to recover that amount from the at-fault party. This process helps prevent the insured from receiving a double recovery while allowing insurers to recoup losses and keep premiums more manageable over time. Understanding this concept is crucial for grasping how insurance companies manage risk and claims.

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