Alberta General Insurance Level 1 Practice Exam

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What is subrogation?

  1. A type of insurance policy

  2. A method of calculating premiums

  3. Transferring rights to the insurer to seek compensation

  4. Renewing a policy before it expires

The correct answer is: Transferring rights to the insurer to seek compensation

Subrogation is the process by which an insurer takes over the rights of the insured to seek compensation from a third party. This typically happens when an insurer pays out a claim to the insured and then seeks reimbursement from the responsible party. Options A, B, and D are incorrect because they do not accurately describe subrogation. Option A, a type of insurance policy, is too broad and does not specify what type of policy. Option B, a method of calculating premiums, is not related to subrogation at all. Option D, renewing a policy before it expires, is also unrelated to subrogation. Option C is the only choice that accurately describes the concept of subrogation.

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