In the event of damage caused by a third party, what is the purpose of subrogation?

The purpose of subrogation is primarily to enable the insurer to recover costs from a third party responsible for the damage or loss. When an insured party suffers a loss and files a claim, the insurance company pays for the damages or losses incurred. If it is determined that a third party is at fault for causing that loss, subrogation allows the insurer to step in and seek reimbursement from that third party.

This process helps the insurer mitigate the financial impact of the claim by recouping some or all of the funds it paid out to the insured. Additionally, it helps keep insurance premiums more manageable for policyholders, as recovery of costs through subrogation can help offset expenses incurred by the insurer.

In contrast, options that suggest the purpose is to prevent claims or deny coverage misrepresent the function of subrogation, as it is meant to facilitate recovery rather than limit benefits for the insured. Furthermore, retaining all benefits or preventing claims contradicts the very essence of insurance, which is to provide financial protection in the event of loss.