What does "subrogation" mean in insurance?

Subrogation in insurance refers to the right of an insurer to pursue recovery from a third party who may be responsible for a loss after the insurer has compensated the insured for the claim. This process allows the insurer to "step into the shoes" of the insured and seek reimbursement for the amount paid out on the claim. Essentially, it is a mechanism that helps insurance companies recover their losses, ultimately keeping premiums lower for policyholders by reducing the insurer's overall costs.

Understanding subrogation is crucial in the insurance context, as it highlights the collaborative relationship between insurers and policyholders in managing risk and expenses. Knowing that insurers can seek reimbursement from responsible parties reinforces the importance of liability assessments and the role of legal frameworks in insurance claims.