The insurance principle that allows an insurance an insurance company to take over the rights of the insured once he has been compensated is

Answer Details

The insurance principle that allows an insurance company to take over the rights of the insured once he has been compensated is called subrogation. Subrogation allows the insurance company to step into the shoes of the insured and pursue recovery from a third party who may have caused the loss that the insurance company compensated the insured for. In simple terms, if an insurance company pays a claim to an insured person, and it is later determined that the loss was caused by someone else, the insurance company can take legal action against that third party to recover the funds they paid out. This helps to ensure that the insurance company is not out of pocket for losses that were not their responsibility. The principle of subrogation is distinct from other insurance principles, such as indemnity, which requires that an insurance company compensate the insured for their actual losses, and utmost good faith, which requires that both the insurance company and the insured act in good faith and disclose all relevant information to each other.