North Carolina Adjuster Practice Exam 2025 – 400 Free Practice Questions to Pass the Exam

Subrogation refers to the process where an insurer, after compensating the insured for a loss, gains the right to pursue recovery from a third party responsible for that loss. This legal principle allows the insurer to step into the shoes of the insured and seek compensation from the party that caused the damage or injury. Essentially, it serves to prevent the insured from receiving a double recovery—being compensated by both their own insurer and the party at fault.

In the context of insurance claims, subrogation is crucial because it helps insurers recoup costs incurred for claims they paid out. This process not only helps maintain the insurer's financial health but also holds the responsible party accountable for their actions, thereby promoting fairness within the insurance system.

The other choices do not accurately represent the concept of subrogation. Settling a claim pertains to the resolution process following a loss rather than pursuing recovery from a third party. The calculation of premiums relates to determining the cost of coverage for policyholders. Negotiating lower costs may refer to various aspects of insurance but does not encapsulate the legal recovery aspect of subrogation.