State RegulationsCA specific✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
A real estate company offers a free one-year life insurance policy to anyone who buys a home through it. Under California Insurance Code Section 777.1, this practice is:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Section 777.1 prohibits giving away or offering free insurance as an inducement to the purchase of goods, services, or other property. The statute targets using insurance as a promotional tool to close another sale — here, a free policy to induce a home purchase. Both the person offering it and any insurer participating can be held in violation.
Why the other options are wrong
- B) The fact that the consumer paid for the home does not legalize the free policy; the free insurance itself is the prohibited inducement.
- C) Section 777.1 contains no small-face-amount exception; any free insurance given to induce a purchase is barred.
- D) Insurer consent cannot legalize a statutory violation; the prohibition is absolute.
Memory hook
Free insurance to close a sale = illegal bait. Section 777.1 bans the giveaway.