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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 loss claim under an indemnity contract, to:

Subrogation lets the insurer, once it has paid a claim under an indemnity contract, step into the insured's position and recover the loss from the responsible third party. This stops the insured from profiting by claiming twice for the same loss.

  1. AStep into the insured's shoes and recover the loss from a responsible third partyCorrect
  2. BCancel the policy and refund the entire premium to the insured
  3. CIncrease the sum insured automatically for the next policy year
  4. DTransfer the claim liability to the policyholder's nominee

Explanation

Subrogation is the right of the insurer to stand in the place of the insured after settling a claim and pursue recovery from a third party who caused the loss. It prevents the insured from recovering twice. The other options describe actions unrelated to subrogation.

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