Tennessee Insurance Practice Exam 2026 – All-in-One Resource for Exam Success!

Subrogation is the correct term for the reimbursement of benefits to a beneficiary for injuries caused by a third party. This legal principle allows an insurance company that has paid out a claim due to another party’s negligence to step into the shoes of the insured and pursue recovery from that third party.

In practice, when an insured person files a claim for injuries caused by someone else, their insurance pays for the expenses. After the claim is settled, the insurance company may then seek to recover the costs from the responsible party or their insurer. This process not only helps insurers reduce their losses but also holds responsible parties accountable for the harms they cause.

Other terms in this context serve different purposes. Exemption generally refers to a provision that releases a party from certain obligations or liabilities, which does not apply here. Indemnification refers to a compensation arrangement where one party agrees to compensate another for certain damages or losses but does not specifically involve third-party reimbursement. Compensation, while it relates to payment for loss or injury, does not carry the specific legal connotation of recovering costs after an insurance payout involving a third party.