South Carolina Life Insurance Practice Exam

If an insurance company is domiciled in California but transacts in Nevada, how is it classified in Nevada?

1. Foreign insurer

2. Domestic insurer

3. Alien insurer

4. Local insurer

The correct answer is: Foreign insurer

When an insurance company is domiciled in one state but operates in another, it is classified as a foreign insurer in the state where it is conducting business. In this case, since the insurance company is based in California and is transacting business in Nevada, Nevada recognizes that company as a foreign insurer. Domicile refers to the state where the company is incorporated or has its principal place of business, and transactions outside that state place it in the category of a foreign entity. A domestic insurer is one that is incorporated or primarily does business in the state where the question is asked, which is not applicable here since the insurer is based in California. An alien insurer, on the other hand, refers to an insurance company that is incorporated outside of the United States. Finally, a local insurer typically describes companies that operate specifically within a defined local area, not fitting this scenario either. Therefore, the most accurate classification for the insurer transacting in Nevada, while based in California, is that of a foreign insurer.