Which of the following is a correct statement about insuring with unauthorized insurers?

Insuring with unauthorized insurers involves certain regulations and requirements to protect consumers. The correct statement highlights that disclosure to the insured is required when placing business with unauthorized insurers. This means that if an insurance agent or broker is utilizing an unauthorized insurer, they must inform the insured of the status of the insurer. This disclosure is important because unauthorized insurers do not have the same level of regulatory oversight as licensed insurers, which can affect the policyholder's coverage and the insurer's financial stability.

The requirement for disclosure ensures transparency and allows the insured to make an informed decision regarding the coverage they are obtaining. This is crucial because the insured needs to be fully aware of the potential risks associated with insuring with an unauthorized entity, which may not have the same protections as those available through authorized insurers.

In contrast, the other statements do not accurately reflect the nuances of the relationship between unauthorized insurers and insured parties. For example, it is not true that the risk is always fully covered, as unauthorized insurers may provide limited coverage or have other stipulations. It is also misleading to say it is illegal to insure with unauthorized insurers; while there are regulations, it is not outright illegal if the necessary disclosures are made. Lastly, while licensed brokers are typically involved in the process, it is