A client asks which items must be specified in an insurance policy. Under California Insurance Code Section 381, which of the following must a policy specify?
Select an option to reveal the answer and the full 3-part explanation — free, no signup.
Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Section 381 requires every policy to specify the parties between whom the contract is made, the property or life insured, the insured's interest if not the absolute owner, the risks insured against, the period during which the insurance is to continue, and the premium (or the basis and rates on which the final premium will be determined). The policy period is one of these six required items. Financial ratings, dividend schedules, and commission amounts are not among the Section 381 requirements: ratings are informational data published by private rating agencies, dividends apply only to participating policies, and commissions are a private matter between agent and insurer.
Why the other options are wrong
- B) Financial strength ratings are published by private rating agencies as informational data; no California statute requires them to be printed in the policy.
- C) Dividends are payable only under participating policies, and no dividend schedule of any kind is a Section 381 required provision.
- D) The agent's commission is a private arrangement between agent and insurer and is never a required policy provision under Section 381.
Memory hook
Section 381's six-pack: parties, subject, interest, risks, period, premium. Ratings, dividends, and commissions are not in the six-pack.