When does a policyholder typically have to subrogate rights to the insurer?

A policyholder typically has to subrogate rights to the insurer after making a claim. In the context of insurance, subrogation refers to the process by which an insurance company can pursue payment from a third party that caused the insured loss, after the insurer has compensated the policyholder. By making a claim, the policyholder is essentially assigning their right to recovery against the responsible party to the insurance company, enabling the insurer to seek reimbursement for the amount it paid out.

This is an essential process because it helps keep premiums lower by allowing insurers to recover costs, thus preventing the policyholder from receiving a windfall—recovering both from the insurer and the responsible party. The timing of this transfer of rights is critical; it occurs after the claim is made, as the insurer needs to fulfill its obligation to the policyholder first before it can step into their shoes and try to recoup costs from the third party responsible for the loss.

Subrogation does not take place before an accident occurs, as no claim exists prior to an event that would trigger policy coverage. It also does not happen only when a claim is denied, as the act of subrogation is fundamentally about recovering costs after a claim is paid out rather than being tied to the