Insurance Dwelling Policy Practice Test 2025 - Free Dwelling Policy Practice Questions and Study Guide

Question: 1 / 400

What does the term “subrogation” mean in insurance?

The process of settling claims

The insurer's right to recover losses from a third party

Subrogation refers to the insurer's right to recover losses from a third party who is responsible for causing those losses after the insurer has paid a claim to the insured. This legal concept allows the insurer to step into the shoes of the insured and pursue reimbursement from the party at fault. For example, if a driver is involved in an accident caused by another driver, and the insurance company pays for the damages to the first driver’s vehicle, the insurance company can then seek recovery from the other driver or their insurance company. Subrogation helps insurance companies manage risk and keep premium costs down by holding responsible parties accountable for their actions. This process is crucial in the insurance industry as it ensures that the burden of loss is ultimately borne by the responsible party rather than the insurer or the insured.

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Transferring risk to the insured

The procedure for canceling a policy

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