Which term refers to the insurance company's right to pursue recovery from a third party after paying a claim?

The term that refers to the insurance company's right to pursue recovery from a third party after paying a claim is subrogation. This concept comes into play when an insurance company pays for a loss that was caused by someone else's negligence or wrongful act. After covering the insured's loss, the insurer is entitled to "step into the shoes" of the insured and seek reimbursement from the party responsible for the damages. This process helps the insurer recover some or all of the costs associated with the claim, thereby keeping premiums more stable for policyholders.

In the context of the incorrect options, a deductible represents the amount that the policyholder must pay out of pocket before the insurance company will cover any losses. Indemnification is a broader term referring to the compensation for damages or losses that the insured suffers, ensuring that they are restored to their pre-loss financial position. Reinsurance involves insurance that is purchased by an insurance company to mitigate its risk by spreading it across multiple insurers. While all these terms have significant relevance in insurance, subrogation specifically highlights the insurer's right to recover funds from third parties after a claim reimbursement.