What does the term "subrogation" refer to in insurance?

The term "subrogation" in insurance refers specifically to the insurer's right to recover costs from the party responsible for a loss. When an insurance company pays a claim to the policyholder for damages, it often seeks to recoup that amount from the third party who caused the damage or loss. This process ensures that the responsible party ultimately bears the financial burden of the loss rather than the insurer or the insured.

Subrogation serves a vital role in maintaining fairness within the insurance system and helps keep premiums lower for policyholders by allowing insurers to recover some of their expenses. Essentially, it helps prevent the insured from receiving a double recovery (both from their insurer and the party at fault) and reinforces the principle of accountability in liability situations.

The other options relate to different aspects of insurance operations. While underwriting pertains to assessing risk when initiating a policy, mixing multiple properties under one policy refers to a type of coverage rather than the rights of recovery. Lastly, determining property value in a claim is part of the claims process but does not encompass the rights involved in recovering costs after payment has been made.