Health Insurance Mastery Practice Exam

What document gives an insurer the approval to operate in a state?

1. Insurance license

2. Policy agreement

3. Certificate of Authority

4. Financial statement

The correct answer is: Certificate of Authority

The document that grants an insurer the approval to operate in a state is the Certificate of Authority. This official document is issued by the state’s insurance department and indicates that the insurer has met all regulatory requirements to conduct insurance business within that state. It ensures that the insurer is financially stable and complies with the laws and regulations governing insurance practices, thereby providing a level of protection and trust for consumers. Other documents like an insurance license and policy agreements serve different purposes. The insurance license is a broader term that often refers to the authorization for agents or brokers to sell insurance, while policy agreements detail the terms of insurance coverage between the insurer and the insured. Financial statements, although important, relate to the insurer’s fiscal health and are not the authorization to operate. Thus, the Certificate of Authority is the definitive document that establishes an insurer's right to conduct business within a specific state.