South Carolina Life Insurance Practice Exam

An insurance company formed under the laws of another state is known as what type of insurer?

1. Foreign

2. Domestic

3. Alien

4. Mutual

The correct answer is: Foreign

The correct term for an insurance company that is formed under the laws of another state is "foreign." This designation is used when referencing insurers that are established in one state but are operating in another state, distinct from the home state where they were incorporated. Understanding this classification is crucial because insurance regulations can vary significantly from one state to another. A foreign insurer must comply with the regulatory requirements of the state in which they are operating, despite being established elsewhere. This ensures that they are appropriately licensed to conduct business in that state. In contrast, a domestic insurer is established under the laws of the state in which it operates, while an alien insurer is formed in a country outside the United States. The term "mutual" refers to a type of insurance organization owned by its policyholders, which does not pertain to the geographical classification of the insurer. Familiarity with these terms is essential for navigating the insurance industry and understanding how different insurers operate within various jurisdictions.