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

In insurance, the principle of 'subrogation' allows the insurer, after paying a covered indemnity claim, to do which of the following?

Subrogation lets the insurer, after paying an indemnity claim, take over the policyholder's rights and recover the loss from a negligent third party. It supports the indemnity principle by stopping the insured from profiting by claiming from both the insurer and the wrongdoer.

  1. AStep into the policyholder's shoes to recover the loss from a negligent third partyCorrect
  2. BCancel the policy and refund the entire premium to the insured
  3. CIncrease the sum insured without further underwriting
  4. DTransfer the claim liability to the policyholder's nominee

Explanation

Subrogation applies to contracts of indemnity. After settling the claim, the insurer acquires the insured's rights against the third party who caused the loss. This prevents the insured from recovering twice. The other options describe things unrelated to subrogation.

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