Under California Insurance Code Section 380, the term 'policy' refers to:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Section 380 defines the policy as the written instrument in which a contract of insurance is set forth. In other words, the insurance contract — its terms, conditions, and coverages — must be reduced to writing to constitute a policy. An oral agreement, an application, or a premium receipt may be evidence of the transaction, but none of them is the policy. The writing requirement protects both parties by fixing the exact terms of the bargain, and it explains why delivery of the policy is a critical moment in the sales process: the client reads the actual contract of coverage before it takes effect.
Why the other options are wrong
- B) An oral agreement does not constitute a policy; Section 380 requires the contract to be set forth in a written instrument, which is the policy itself.
- C) A premium receipt merely evidences payment of the first premium; it is not the policy and does not contain the full terms of coverage.
- D) The application is the applicant's proposal for insurance, which the insurer may accept or reject; the policy is the insurer's written contract that results from that acceptance.
Memory hook
Section 380: the policy is the written paper that holds the whole deal. No paper, no policy.