What is subrogation in the context of insurance claims?

Subrogation is the right of an insurer to pursue a third party that caused an insurance loss to the insured. It occurs when the insurance company, after paying a claim to the insured, seeks to recover the amount paid from the responsible party. This process allows the insurer to maintain financial balance and helps to prevent the insured from being compensated twice for the same loss.

In the context of the choices provided, the first option aptly captures this definition. The other options relate to different aspects of the insurance claims process but do not accurately explain subrogation itself. Assessing a claim involves evaluating its validity and determining the compensation owed, while negotiating settlement amounts pertains to the discussion of how much will be paid. Verification of policy terms involves checking that the coverage applies to the incident in question. All these processes are crucial in claims handling, but they don’t describe the fundamental concept of subrogation.