Any company more than half of the business of which during the taxable year is the issuing of insurance or annuity contracts or the reinsuring of risks is referred to as:

Question

Options

• Ataxable company
• Bnon-life insurance company
• Cinsurance company
• DProvision Company

• A
  4% (2)
• B
  5% (3)
• C
  76% (42)
• D
  15% (8)

Explanation

Option C is correct because the IRS tax code defines an "insurance company" specifically as any company where more than half its business involves issuing insurance or annuity contracts, or reinsuring risks - this is the statutory definition used in U.S. tax law (IRC §816 and §831).

Why the distractors are wrong:

• A (taxable company) is not a recognized legal classification for this type of entity; all companies may be taxable regardless of their business type.
• B (non-life insurance company) is a real subcategory (property/casualty insurers), but it's too narrow - the definition in the question covers all insurance companies, not just non-life ones.
• D (Provision Company) is not a recognized legal or tax term at all.

Memory tip: Think of the "more than half" rule as the key threshold - if insurance/annuity/reinsurance is the majority of a company's business, it earns the label "insurance company" under tax law. The term is broader than it sounds: it includes life, non-life, and reinsurance under one umbrella definition.

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