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

In insurance, the principle of subrogation allows an insurer who has paid a claim under an indemnity contract to:

Subrogation lets an insurer that has paid a claim under an indemnity contract take over the insured's rights and recover the loss from a negligent third party. This prevents the insured from gaining twice, once from the insurer and again from the wrongdoer.

  1. AStep into the insured's shoes and recover the loss from a negligent third partyCorrect
  2. BCancel the policy and refund the entire premium to the insured
  3. CClaim a share of the loss from the insured's family members
  4. DIncrease the sum insured at the next renewal without consent

Explanation

Subrogation applies to contracts of indemnity. After paying the claim, the insurer acquires the insured's rights against the party responsible for the loss, so the insured cannot profit twice. The other options do not describe subrogation.

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