What document shows that an insurer is authorized to transact business in a specific state?

A certificate of authority is the document that proves an insurance company is authorized to conduct business in a specific state. This certificate is issued by the state's regulatory agency, typically the Department of Insurance, and it confirms that the insurer has met all the necessary regulatory requirements, including financial stability, compliance with state laws, and licensing standards.

This document serves as official recognition that the insurer has the right to sell insurance products and provide coverage within that state. Without a certificate of authority, an insurer would not be legally able to operate, which protects consumers by ensuring that only qualified companies are offering insurance products in the market.

Other options do not serve this specific function. A license agreement usually refers to permission granted for the use of certain rights, an insurance policy is a contract between the insurer and the insured detailing the terms of coverage, and binding authority generally refers to the power given to an agent or broker to commit the insurer to coverage before a formal policy is issued, rather than being a document that indicates state authorization.