What is subrogation in insurance?

Subrogation in insurance specifically refers to the process by which an insurance company that has paid a claim can seek to recover that amount from a third party who was responsible for the loss. This concept exists to prevent the insured from receiving a double recovery—once from the insurance company and again from the responsible party. When an insurer pays a claim, they essentially step into the shoes of the insured to pursue any legal rights against the party at fault.

This mechanism not only helps the insurer recoup its losses but also contributes to keeping insurance premiums lower for policyholders, as it mitigates the financial impact of claims. Understanding subrogation is crucial for both insurers and insureds, as it highlights the collaborative relationship between different entities within the insurance framework, ultimately ensuring that responsibility for losses is appropriately assigned and settled.