Hawaii Insurance License Practice Exam

What must be explicitly indicated to an insured purchasing surplus lines insurance?

1. The insurer provides international coverage

2. The insurer has a local office

3. The insurer is not licensed in the State of Hawaii

4. The policy offers guaranteed renewability

The correct answer is: The insurer is not licensed in the State of Hawaii

When an insured purchases surplus lines insurance, it is critical for the insurer to explicitly indicate that the insurer is not licensed in the State of Hawaii. This requirement serves to inform the insured that they are buying coverage from a non-admitted insurer, which means that the insurer does not hold a license to operate in Hawaii. Surplus lines insurance often comes into play when standard market insurers cannot provide the necessary coverage for unique or high-risk situations. It is important for consumers to be aware of the licensing status of the insurer because it impacts regulatory protections, claims performance, and consumer recourse. Unlike licensed insurers, non-admitted carriers may not be subject to the same state regulations, which can lead to differences in the level of consumer protections offered. The other options present statements regarding aspects of the policy or insurer that do not address the specific requirement associated with surplus lines insurance in Hawaii. Understanding this crucial distinction allows insured individuals to make informed choices and assess any potential risks more accurately when opting for surplus lines coverage.