State RegulationsCA specific✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
California Insurance Code Section 381 requires a policy to specify the parties, the subject insured, the insured's interest, the risks insured against, the period, and the premium or its basis. The primary purpose of this requirement is to:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Section 381's list of required specifications - parties, property or life insured, interest, risks, period, and premium or the basis for determining it - exists so the contract is complete and definite. A policy that states these essential elements can be identified, performed, and enforced, and consumers can see what is covered. This is a contract-certainty requirement, not a pricing, profitability, or underwriting rule.
Why the other options are wrong
- B) The provision addresses contract completeness, not the insurer's profitability.
- C) The specifications define the agreed terms; the agent cannot later change them unilaterally.
- D) Section 381 does not replace underwriting; it governs what the issued policy must state.
Memory hook
Six specifications = a definite deal. Say who, what, interest, risks, period, and premium.