South Carolina Personal Lines Practice Exam

Which provision prevents an insured from collecting twice for the same loss?

1. Deductible

2. Exclusion

3. Subrogation

4. Limitation

The correct answer is: Subrogation

The correct answer is subrogation. This provision is fundamental in insurance contracts as it allows an insurer to seek reimbursement from a third party that caused a loss after they have compensated the insured. This process ensures that the insured does not receive a double recovery for the same loss from both their insurance policy and from the responsible third party. When an insured suffers a loss and their insurer pays them for it, subrogation allows the insurer to take legal action against the party at fault to recover the amount paid out after settling the claim. This mechanism not only protects the insured from being unjustly enriched by receiving payment from both the insurer and the at-fault party, but also helps keep insurance premiums in check since it allows insurers to recover their losses from negligent parties. The other options, such as deductible, exclusion, and limitation, serve different purposes within insurance policies. A deductible represents the amount the insured must pay out of pocket before the insurance coverage kicks in. An exclusion refers to specific conditions or types of loss that are not covered by the policy, while a limitation might place caps on the amount recoverable for certain types of losses. None of these provisions directly address the issue of preventing duplicate recovery for the same loss, which is why subrogation is