What does the term "Subrogation" mean in an insurance context?

Subrogation refers to the right of an insurance company to pursue a third party that caused a loss to its insured. This means that when an insurer pays for a loss suffered by their policyholder, they can then seek to recover that amount from the responsible third party. This practice is essential for maintaining fair insurance rates and ensuring that the party at fault ultimately bears the financial responsibility for their actions.

In the context of insurance, subrogation is important because it helps prevent policyholders from paying for damages caused by someone else's negligence and allows insurers to reclaim costs. This process not only benefits the insured by potentially lowering their own claim costs but also helps keep overall insurance premiums more stable by allowing insurers to recoup some of their expenses.

Understanding subrogation is crucial for adjusters, as it plays a significant role in claims management and recovery efforts.