South Carolina Life Insurance Practice Exam

An insurance company that operates in more than one state is known as what type of organization?

1. Domestic

2. Foreign

3. Alien

4. Multistate

The correct answer is: Foreign

An insurance company that operates in more than one state is classified as a foreign organization. This designation refers specifically to insurance companies that are incorporated in one state but conduct business in additional states. Each state has its own regulatory framework, and when a company is operating outside its home state, it must comply with the regulations of the states in which it is doing business. The term "domestic" is used for a company that is incorporated in the state where it is operating, while "alien" refers to an insurance company that is based outside the United States. The choice "multistate" is not a formal classification used in insurance regulation. Therefore, the correct classification for an insurance company operating across state lines is foreign. This clarity is important for understanding how regulation impacts companies doing business in multiple jurisdictions.