West Virginia Property and Casualty Licensing Practice Exam

What percentage tax must be collected by the surplus lines licensee?

1. 2%

2. 3%

3. 4%

4. 5%

The correct answer is: 4%

The correct tax percentage that must be collected by the surplus lines licensee is 4%. Surplus lines insurance refers to coverage obtained from non-admitted insurers, which are not licensed in the state but provide specialized insurance products that may not be available from admitted carriers. In many jurisdictions, including West Virginia, surplus lines licensees are required to collect a tax from policyholders based on the premium amount. This tax is typically imposed to ensure that the state can maintain oversight of the insurance market and protect consumers. The 4% rate indicates a regulatory measure that applies specifically to surplus lines transactions, distinguishing them from traditional insurance placements where different tax rates may apply. The other options reflect incorrect tax percentages that do not align with the established regulations. Specifically, they might represent general rates applicable to standard insurance lines or may not account for the special nature of surplus lines insurance. Understanding this context is crucial for recognizing the unique role of surplus lines licensees in the insurance framework and the tax obligations that accompany their services.