Texas Property and Casualty License Practice Exam

In contrast to domestic, what does "foreign" imply?

1. Related to matters within a city

2. Involvement of international law

3. Another state

4. Actions limited to federal domain

The correct answer is: Another state

The term "foreign" in the context of insurance, particularly when discussing insurance companies, refers to the concept of an entity or operation that is based in a different state than where it is being discussed or regulated. In this case, a foreign insurance company is one that is licensed to operate in a state but is incorporated in another state. This means that the company is not domestic to the state in question. For instance, if an insurance company is incorporated in California but operates in Texas, it is considered a foreign company in Texas. This distinction is important for regulatory purposes, as each state has its own insurance laws and regulations that govern how insurance companies operate within its borders. The other options do not accurately capture the meaning of "foreign" in this context. For example, matters within a city pertain to local governance and are more related to domestic issues. Involvement of international law typically refers to cross-border regulations and agreements, rather than state-level distinctions. Lastly, actions limited to the federal domain do not specifically relate to the concept of foreign versus domestic companies, as they often pertain to federal law rather than state regulatory frameworks.