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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Basics of Insurance

A client's car, insured with Insurer A, is damaged in an accident caused by a third party who is legally liable. After Insurer A settles the client's own-damage claim, it recovers the amount from the negligent party. This right of the insurer is known as:

This right is called subrogation. After paying the claim, the insurer steps into the shoes of the insured and recovers the amount from the third party responsible for the loss. It prevents the insured from profiting twice and places the burden on the wrongdoer.

  1. ASubrogationCorrect
  2. BContribution
  3. CUtmost good faith
  4. DProximate cause

Explanation

Subrogation lets the insurer, after paying the claim, step into the insured's shoes to recover from the party responsible for the loss. Contribution applies when more than one insurer covers the same risk. Proximate cause identifies the dominant cause of loss, and utmost good faith concerns disclosure.

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