Key Takeaways
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Subrogation in insurance is a legal right of the insurance company to legally pursue a third-party responsible for the damages/insurance loss caused to the insured. Subrogation is done to recover the claim amount insurance company pays to the insured for the damages.
In simple words, when you suffer a financial loss because of negligent or irresponsible actions of a third-party, you have a legal right to be compensated for the loss by this party. However, if you had a life insurance for the loss and you file a claim for it, the legal right of pursuing the third-party responsible for the loss also shifts to the insurer.
Principle of subrogation means surrender of the legal right to receive compensation or salvage the damages in the favour of the insurer.
This principle works in the following scenarios:
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Here is how the concept of subrogation works:
Principle of subrogation ensures that insured do not profit from the insurance and the damages are compensated equitably.
Subrogation refers to the surrender of legal rights to recover losses.
A few examples of this principle can be:
The principle of subrogation endows the insurer with certain rights to the claims that the insurer accepts.
These rights can be as follows:
These rights will only come into play once the insurer accepts the claim of the insured for the loss.
Waiver of subrogation is a special provision of the insurance contract. This provision allows the insured to waive off the rights of the insurer to recover the damages from a culprit. The insurance company has to agree to include such a provision in the contract at the commencement. You may have to pay a higher premium to include this provision in your insurance contract.
When discussing subrogation in insurance, it’s common to come across the principle of indemnity. While both are fundamental to insurance contracts, they serve different purposes.
Here’s how subrogation meaning differs from that of indemnity:
Aspect | Subrogation | Indemnity |
Definition | The insurer gains the legal right to recover compensation from a third party responsible for the insured loss. | Ensures that the insured is compensated only for the actual loss suffered, preventing any financial gain. |
Purpose | Prevents policyholders from recovering twice (from the insurer and the at-fault third party). | Maintains fairness by ensuring compensation matches the actual loss. |
Example | If your car is damaged in an accident caused by another driver, your insurer pays for repairs and then claims the amount from the at-fault driver. | If your insured car is worth ₹5 lakh and suffers damage worth ₹2 lakh, the insurer will only pay ₹2 lakh, not the entire sum insured. |
Legal Rights | Transfers the right to sue the responsible party from the insured to the insurer. | Does not involve legal transfers but focuses on fair financial compensation. |
Impact on Policyholders | Once a claim is settled, the insurer, not the policyholder, has the right to recover the amount from the at-fault party. | The insured cannot claim more than the actual loss, ensuring insurance remains a safety net, not a source of profit. |
At all times, subrogation ensures fair insurance practices. Understanding subrogation in insurance is crucial for both policyholders and insurers. It safeguards and prevents insured parties from profiting from losses. Moreover, distinguishing subrogation meaning from indemnity helps in grasping the legal and financial implications of insurance claims.
If you’re uncertain about how subrogation in insurance applies to your policy, you can connect with our support staff for clarity. Our customer support channels are available through calls, mail, and even WhatsApp messages. If you wish to meet us face to face, you can even use our store locator to see our office availability near you.
Remember, the key to fully understanding your coverage and legal standing in case of a claim is its complete knowledge.
Subrogation in insurance allows insurers to recover claim payments from a third party responsible for the loss.
Subrogation meaning refers to the insurer’s right to pursue compensation from a third party after paying a claim.
Subrogation prevents double compensation by allowing insurers to recover losses from negligent third parties.
Subrogation is common in auto, health, and property insurance but may not always apply to life insurance.
If the insured recovers the lost property after a claim, the insurer may reclaim it or adjust compensation accordingly.
Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.
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