What does the term "subrogation" refer to in the context of insurance?

The term "subrogation" in the context of insurance specifically refers to the recovery of costs from a third party after the insurance company has paid a claim to its policyholder. This process allows the insurer to step into the shoes of the policyholder and pursue reimbursements from the responsible party or their insurance company.

Subrogation is a critical aspect of insurance as it enables insurers to mitigate their losses, maintain financial stability, and ensure that the party truly at fault is held accountable for the damages caused. It allows the insurance company to recover expenses incurred as a result of a claim, which can include repair costs, medical expenses, and other related costs. This mechanism also helps to prevent the same loss from being compensated multiple times and is essential for upholding the principle of indemnity in insurance, which ensures that an insured party does not profit from a loss.

The other options address different aspects of the claims process but do not describe subrogation accurately. Settling a claim focuses on resolving the insured's immediate financial need, estimating damages pertains to assessing the extent of loss before approving a claim, and interviewing claimants is part of the information-gathering process that an adjuster might engage in. However, none of these options capture the essence