What is "subrogation" in the context of Dwelling Claims?

Subrogation refers to the right of an insurance company to seek recovery from a third party after it has paid a claim to its insured. This process is essential in the context of dwelling claims because it allows insurers to recoup the amount spent on the claim from the responsible party or their insurer. For instance, if a policyholder experiences damage due to the negligence of another person, after the insurer compensates the policyholder, it has the legal right to pursue that third party for reimbursement of the claim amount. This helps keep insurance costs in check and reinforces accountability for damages caused by third parties.

The other options describe processes or concepts unrelated to the actual recovery of costs by an insurer after paying a claim. The appeal process, premium assessment methods, and adjusting policy limits based on claims history do not involve the transition of rights from the insured to the insurer regarding third-party claims.