State RegulationsCA specific✓ Verified · outline & fact-checked · Sep 2026Difficulty 1/5
Under California Insurance Code Section 22, the insurer's obligation under an insurance contract is best described as:
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 22 defines insurance as a contract whereby one party (the insurer) undertakes to indemnify another (the insured) against loss, damage, or liability arising from a contingent or unknown event. To indemnify means to restore the insured financially to the position enjoyed before the loss. The insurer's duty is triggered only when a covered contingent or unknown event produces loss, damage, or liability. The insurer does not promise to prevent the event, to refund premiums on claim-free years, or to pay expenses the insured simply chooses to incur.
Why the other options are wrong
- B) No insurer can guarantee that a loss will not occur; insurance transfers the financial burden of a loss, not the chance of the event itself.
- C) Premium refunds for a claim-free year are a feature of certain limited products (such as return-of-premium riders), not the basic obligation described by Section 22.
- D) Payment is limited to losses arising from contingent or unknown events; benefits are not payable for any expense the insured merely elects to incur.
Memory hook
The insurer makes the insured whole, not loss-proof. Indemnity restores; it does not guarantee.