Under California Insurance Code Section 381, which of the following is NOT one of the specifications a life insurance policy must state?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Section 381 lists the six specifications every policy must state: the parties between whom the contract is made; the property or life insured; the interest of the insured in the property if the insured is not the absolute owner; the risks insured against; the period during which the insurance is to continue; and the premium, or, where the exact premium is only determinable upon termination, the basis and rates upon which the final premium is to be determined and paid. A financial rating is not among these statutory requirements. Ratings are informational and marketing-oriented tools used by consumers and producers; their absence does not make a policy defective, and their presence is not a substitute for any of the six required specifications.
Why the other options are wrong
- B) The parties between whom the contract is made are expressly required by Section 381(a). A policy that fails to name the contracting parties would not satisfy the statute, so this item is a required specification, not the exception the question asks for.
- C) The life insured and the risks insured against are expressly required by Section 381(b) and Section 381(d). The policy must identify what life or property is covered and what risks are insured against, so this is a required specification.
- D) The period during which the insurance is to continue is expressly required by Section 381(e). Every policy must state its term of coverage, so this item is a required specification, not the non-required item.
Memory hook
Six required items: parties, life, interest, risks, period, premium. A rating is a sales garnish, not a contract term.