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

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

Subrogation lets an insurer that has paid an indemnity claim take over the insured's right to recover the loss from a negligent third party, up to the amount paid. It prevents the insured from receiving compensation twice for the same loss.

  1. AStep into the insured's shoes and recover the loss from a negligent third party up to the amount paidCorrect
  2. BCancel the policy and refund the entire premium to the insured
  3. CDemand a higher premium from the insured for future years
  4. DTransfer the claim liability to the insured's nominee

Explanation

Subrogation applies to contracts of indemnity such as fire or motor insurance. After paying the claim, the insurer acquires the insured's rights against the responsible third party, limited to the amount paid. This prevents the insured from profiting twice, once from the insurer and once from the wrongdoer. The other options describe unrelated actions.

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