Which of the following best describes the term "subrogation" in insurance?

Subrogation is a key concept in insurance that allows an insurer to step into the shoes of the insured after paying a loss in order to pursue recovery from a third party that may be responsible for the loss. This means that after compensating the insured, the insurer has the right to seek reimbursement from the individual or entity that caused the damage.

In the context of insurance, subrogation helps prevent the insured from receiving a "double recovery" for the same loss, as the insured can only recover from one source. It also allows insurers to minimize their losses, which can lead to lower premiums for policyholders overall. This process is essential for maintaining the integrity of the insurance system by allowing insurers to recoup costs when a negligent third party is involved.

The other options do not accurately describe subrogation. Determining liability is part of the broader claims process but does not capture the essence of subrogation itself. Calculation of loss payments pertains to assessing the amount owed to the insured without involving the recovery aspect. Lastly, remedy for bad faith claims handling refers to situations where an insurer does not act in good faith towards its policyholders, which is separate from the subrogation process.