Life & Health Insurance Practice Exam 2026 - Free Practice Questions and Study Guide

The insurer's right to pursue a third party for damages to the insured is known as subrogation. This legal principle allows an insurance company to step into the shoes of the insured after it has paid a claim. By doing so, the insurer can seek to recover the costs of that claim from any party that is found to be responsible for the damage or loss. Subrogation is fundamentally about ensuring that the party at fault bears the financial responsibility for their actions.

This process not only protects the financial interests of the insurer but also helps keep insurance premiums lower for policyholders. When insurers can recoup their costs through subrogation, they can pass some of those savings on to policyholders in the form of reduced rates. Understanding subrogation is vital as it reflects the balance of responsibility in insurance claims and the rights of insurers when they fulfill their obligations to policyholders.

The other concepts, while related to insurance, do not specifically refer to the right of an insurer to pursue a third party for damages. Recourse typically refers to the ability to reclaim or to seek compensation, but it does not imply the specific action of subrogation. Deductible recovery is not a recognized insurance term in this context, and third-party liability refers