State of Domicile

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Rachel Bodine graduated from college with a BA in English. She works as an associate editor and writer for 4autoinsurancequote.com for over a year and enjoys creating content that offers expert advice on car insurance topics.

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Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs...

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Reviewed byLeslie Kasperowicz
Former Farmers Insurance CSRhttps://res.cloudinary.com/quotellc/image/upload/insurance-site-images/4autoins-live/6ea5d860-leslie-kasperowicz.jpg

UPDATED: Mar 13, 2020

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The state of domicile is defined as the specific state under which an insurer is licensed (and chartered) to operate under that state’s individual statutes and regulations that apply to insurance companies. An insurance company is only allowed to conduct business for which it has been certified by the state of domicile.

How ‘State of Domicile’ Works

state of domicile

All states have a legal responsibility for controlling and regulating all the various different aspects of the insurance industry. They are committed to protecting consumers from unscrupulous practices and increased levels of risk, and to ensure that insurance companies are in the right financial position to adhere to the promises and guarantees made in insurance contracts.

One aspect of the regulations governing insurance company behavior is the legal requirement that all insurance companies which are domiciled in a state, obey the laws that govern that particular state. And all businesses that operate in any aspect of insurance including those that are not in their own right insurance companies (in that they do not issue policies or ultimately receive premiums) must comply with state regulations regarding their individual business practices.

No insurance company whether domiciled in a state or not may operate legally in any given state without a license to do so. The law states that all insurance businesses require a license to operate and that this license must be obtained prior to conducting any business with the public.

States take their obligations seriously and there are an estimated 7,200 companies in the United States operating in insurance. In the year 2000, individual state authorities revoked or suspended the licenses of nearly 300 insurance businesses for failing to comply with state regulations, the states also keep a record of fines handed down for more minor violations.

The state of domicile has additional responsibility for ensuring that insurance companies comply with the legal framework as it is their state that will deal with the fallout if an insurance company is found to be behaving in violation of the law.

In respect to individuals or companies that purchase insurance the term, state of domicile, can also be used to describe the state in which the individual resides or has their main residence or in the case of the company where the company is registered (and usually but not always the state where their head office is found).

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