Insurance Broker Certification Practice Exam

What document indicates that an insurer can write insurance contracts in a state?

1. Insurance policy

2. Certificate of Authority

3. Business license

4. State insurance registration

The correct answer is: Certificate of Authority

A Certificate of Authority is the document that indicates an insurer is authorized to write insurance contracts in a particular state. This certification is granted by the state's insurance department after the insurer has met specific regulatory requirements and standards set forth by the state. Having a Certificate of Authority assures consumers and regulatory bodies that the insurer is compliant with local laws and can legally provide insurance coverage. In contrast, an insurance policy is the contract between the insurer and the insured, outlining the terms, conditions, and types of coverage provided. A business license may be necessary for the insurer to operate in a state but does not specifically relate to their ability to write insurance. State insurance registration is not a universally recognized term and does not represent the formal acknowledgment granted to insurers for operating in the insurance market. Therefore, the Certificate of Authority distinctly legitimizes an insurer's capacity to engage in the sale of insurance products within a state's jurisdiction.