What is the primary purpose of subrogation in insurance?

The primary purpose of subrogation in insurance is to ensure that the insured does not collect twice for the same loss. When an insurance company pays a claim to the insured due to damages or losses incurred, it may seek to recover that amount from the party that was actually responsible for causing the loss. This process helps maintain the principle of indemnity, which is foundational in insurance. Indemnity means that the insured should not profit from a loss but should instead be restored to their financial position prior to the loss without gaining from the situation.

Subrogation prevents the insured from receiving compensation from both their insurer and the liable third party, which could lead to unjust enrichment. As a result, it reinforces an equitable approach to insurance claims and liability. Thus, when subrogation is exercised, it not only allows the insurer to recover funds paid out but also ensures fairness in the resolution of claims.

The other options, while they may relate to the broader contexts of insurance, do not capture the central aim of subrogation as effectively. For instance, while subrogation may incidentally help in reducing premium costs over time, this is not its primary purpose. Similarly, while it can help in legal disputes by clarifying liability, the core function remains