In the context of insurance claims, what does the term "subrogation" refer to?

Subrogation in insurance refers specifically to the insurer's right to recover costs from a third party after they have paid a claim to the policyholder. This process allows the insurer to step into the shoes of the insured to seek reimbursement for the losses they covered, especially in situations where another party is responsible for the damage or loss.

For instance, if a policyholder is involved in an accident caused by another driver, the insurer may pay for the policyholder's damages and then pursue the at-fault driver or their insurance to recover those costs. This mechanism helps keep insurance premiums lower by allowing insurers to recoup losses instead of bearing the full financial burden.

In contrast, the other options pertain to different aspects of the claims process. The right of the policyholder to seek compensation is a fundamental principle of insurance but does not specifically define subrogation. Claim adjustments are a part of the claims handling process, involving the evaluation of losses, and the timeline for processing a claim refers to the duration it takes for claims to be settled, which is unrelated to subrogation.