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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 settling a valid indemnity claim, to:

Subrogation lets the insurer, after paying a valid indemnity claim, step into the insured's shoes and recover the loss from a negligent third party. It prevents the insured from profiting twice and keeps the wrongdoer accountable, up to the amount paid.

  1. AStep into the insured's position and recover the loss from a negligent third partyCorrect
  2. BCancel the policy and refund the entire premium to the insured
  3. CPay the insured an amount higher than the actual loss
  4. DTransfer the policy to another insurer without consent

Explanation

After paying an indemnity claim, the insurer acquires the insured's rights against a responsible third party up to the amount paid. This prevents the insured from recovering twice and stops the wrongdoer from escaping liability. Paying more than the loss would breach indemnity.

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