State RegulationsCA specific✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
Under California Insurance Code Section 777.1, which of the following arrangements is PERMITTED?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Section 777.1 prohibits offering insurance as an inducement to purchase or rent property or services without a separate charge, but it lists express exceptions. One exception permits life or disability insurance written in connection with an indebtedness where the purpose is to pay the balance of the debt on the insured's death or disability. The other options are classic prohibited inducements tied to product purchases or leases.
Why the other options are wrong
- B) Free coverage handed out to buyers of a product is the precise inducement the statute prohibits.
- C) Travel insurance given away with a booking and no separate charge violates Section 777.1.
- D) A free life policy used to induce a lease is an unlawful inducement under the statute.
Memory hook
Section 777.1 lets insurance ride along with loans, not with sofas. Debt payoff coverage is legal; freebie lures are not.