The bedrock of subrogation is the concept of indemnity, that is, the act of stepping in to collect a definite, cognizable amount of money, an insurer paid on behalf of another. One of the major arguments against allowing life insurance subrogation is that life insurance is, in essence, an investment vehicle rather than an indemnity payment.
For instance, in an automotive subrogation case the insurer pays out a certain amount of money based upon the repair bills, rental car expenses and medical bills. However, in life insurance there is a pre-determined amount of money paid out to the insured’s estate triggered by the policyholder’s death. This occurs no matter what the circumstances of the death were, barring suicide of course. There should be a distinction made between short term, or “term life” policies and long-term life insurance policies. the former are more of a hybrid between investment and indemnity, whereas long-term life insurance policies resemble investment vehicles.
