Explanation:

- Option 1: Investment of policy amount

Insurance policies do not relate to investment principles; they provide risk coverage.

- Option 2: Refund for insured and insured's insurance company

This describes subrogation incorrectly. Subrogation allows insurers to recover costs after compensating the insured.

- Option 3: Auto-renewal of policy

Irrelevant to subrogation. Auto-renewal deals with policy continuation, not legal principles.

- Option 4: Indemnification of the insured

Indemnification means compensating for loss, which insurers do, but subrogation follows this to recover costs.

Correct Answer:

- Subrogation Principle: This allows an insurance company, after compensating an insured, to pursue recovery of funds from third parties responsible for the loss. This offsets the insurer's payout.