Certified Financial Consultant (CFC) Practice Exam

Which document is issued by the state Department of Insurance to give an insurer permission to write insurance contracts in that state?

1. Insurance License

2. Certificate of Authority

3. Policy Document

4. Insurance Agreement

The correct answer is: Certificate of Authority

The Certificate of Authority is the correct answer because it is the official document issued by the state Department of Insurance that grants an insurer the legal right to operate and write insurance contracts within that specific state. This regulatory requirement ensures that only qualified and financially stable insurers can offer policies, protecting consumers by ensuring a standard of safety and reliability within the insurance market. An Insurance License, while it may seem like a relevant term, typically refers to the individual or agent licensed to sell insurance products, rather than the company itself. The Policy Document pertains to the actual terms and conditions of the insurance coverage purchased by a policyholder, and the Insurance Agreement generally outlines the commitments and protections established by the insurer and the insured. However, neither of these documents confer the authority to an insurer to conduct business, which is the primary function of the Certificate of Authority.