South Carolina Life Insurance Practice Exam

Which document is required for an insurance company to legally transact insurance?

1. License from the government

2. Certificate Authority

3. Insurance bond

4. Financial statement

The correct answer is: Certificate Authority

The requirement for an insurance company to legally transact insurance is typically a license from the government. A license serves as proof that the insurance company has met the necessary regulatory standards set by state authorities, ensuring that they comply with laws related to financial solvency, consumer protection, and ethical marketing practices. The other options do not serve the same legal purpose as a government license. A certificate authority relates more to digital security and does not pertain to insurance transactions. An insurance bond, while it may be a requirement under certain conditions, does not replace the need for a license. Financial statements are important for assessing the company's health and viability but do not provide legal permission to operate. In summary, a government-issued license is the primary document allowing an insurance company to legally conduct its business.