Under California Insurance Code Section 777.1, which arrangement is EXCEPTED from the general prohibition on offering insurance as an inducement to a purchase?
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
Section 777.1 prohibits insurers and producers from offering insurance as an inducement to purchase property or services without a separate charge, but it explicitly excepts, among others, title insurance and life or disability insurance written in connection with an indebtedness whose purpose is to pay the balance of the debt on the insured's death or disability — credit life and disability coverage. Also excepted are newspaper-subscription coverages, credit-union coverage, goods-performance guarantees, and incidental coverage costing the seller no more than $1 per year per purchaser.
Why the other options are wrong
- A) Giving a free life policy as an inducement to buy appliances is the very conduct Section 777.1 prohibits.
- C) Free fire insurance tied to a security-system purchase is a prohibited inducement, not a listed exception.
- D) The statute's blanket rule requires a separate charge; its exceptions are narrow and specific, not general.
Memory hook
777.1 bans free insurance bribes — but credit life/disability paying off a loan is an allowed carve-out.