Which of the following is the best description of subrogation?

a. The insurer has the responsibility to defend the insured against lawsuits or liability claims.

b. The insurer has the right to pursue legal action against a third party who is liable for a loss that has been paid to an insured by the insurer.

c. The insured cannot declare something a total loss and turn it over to the insurer and demand payment without the insurer's consent.

d. The insurer can change the same type of policy the insured owns in any way, providing for more coverage without additional premium. The insured's original policy will be extended for those coverages without need for additional forms or premium.

Answer: B

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An insured's building has an actual cash value of $200,000, and he has insured the property for $120,000 with an 80% coinsurance clause. A $40,000 loss occurs. How much will the policy pay?

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