What is "subrogation" in insurance?

Subrogation in insurance refers to the insurer's right to recover costs from a third party after paying a claim to its policyholder. When an insurance company pays for a loss that is actually the fault of another party, subrogation allows the insurer to step into the shoes of the insured and seek reimbursement from the party responsible for the loss. This helps ensure that the insured does not receive a windfall (getting compensated for the same loss twice) and that the financial responsibility rests with the party at fault. Subrogation is an essential part of the insurance process, promoting fairness and accountability in the system.

The other options do not accurately describe the concept of subrogation. Reassessing a policyholder's premium is related to underwriting and risk assessment rather than the recovery of costs. Adjusting claims for settlements pertains to determining the amount payable under an insurance policy but does not involve recovering costs from third parties. Renewing an insurance policy involves the continuation of coverage but is unrelated to the actions taken after a claim is made. Overall, understanding subrogation is key to grasping how insurance companies mitigate their losses and uphold the balance of compensation in the insurance landscape.