What is a "subrogation" clause in an insurance policy?

A "subrogation" clause in an insurance policy is an essential component that allows the insurer to seek reimbursement from a third party for losses that they have already compensated to the insured. This means that if an insurance company pays out a claim to a policyholder who experienced a loss due to someone else's negligence or wrongful act, the insurer can then pursue that third party to recover the amount of money they paid to the insured.

The rationale behind subrogation is to prevent the insured from collecting damages twice for the same loss, once from the insurance payout and potentially again from the responsible party. It helps to ensure that the financial burden falls on the actual party at fault rather than on the insurer or the insured.

Embedding subrogation clauses is beneficial for insurers as it allows them to mitigate their losses and maintain lower premiums for policyholders, promoting fairness in the insurance system. Such clauses are standard in most insurance policies, including auto, homeowners, and health insurance.

The other options describe unrelated concepts or benefits that are not associated with subrogation. They may address denial of claims, policyholder rights related to cancellation or seeking additional benefits, but they do not capture the essence of what a subrogation clause accomplishes in the context of insurance contracts.