California Property & Casualty: General Insurance, Contracts & the California Marketplace

Correct

The answer is D: A statement of the premium, or its basis and rates.

Insurance Code §381 says a policy must specify the parties between whom the contract is made; the property or life insured; the insured's interest in the property, if the insured is not the absolute owner; the risks insured against; the period during which the insurance continues; and either a statement of the premium or, if the exact premium can be determined only at the end of the contract, the basis and rates for figuring it. A social security number, a producer's errors and omissions policy number and a list of prior claims are not among them.

Reviewed in our October 2026 California fact-check.

Correct

The answer is C: §703

Insurance Code §703 makes it a misdemeanor, except when done by a surplus line broker, to act as agent for a nonadmitted insurer in transacting insurance for a home state insured, to advertise a nonadmitted insurer in California, or to aid one in transacting insurance here. Section 1761(a) is the companion rule that insurance with nonadmitted insurers for a home state insured may be transacted only through a licensed surplus line broker. Section 1760.1(f) only defines 'home state insured'; it prohibits nothing. Section 1764.1 sets the disclosure notice a surplus line broker must get signed, and §1764.2 limits when a surplus line broker may issue evidence of coverage; neither prohibits an unlicensed producer from acting for a nonadmitted insurer.

Reviewed in our October 2026 California fact-check.

Correct

The answer is B: CIGA

The California Insurance Guarantee Association (CIGA) provides for the payment of 'covered claims' of insolvent member insurers to protect the public from financial loss due to insurer insolvency.

Reviewed in our October 2026 California fact-check.

Correct

The answer is C: It was a physical hazard that increased the severity of the loss.

A peril is the direct cause of loss (e.g., the fire). A hazard is anything that increases the chance of loss or the severity of loss. Physical hazards are tangible conditions that increase risk. The paint thinner, a tangible item, increased the severity of the fire damage once the fire (peril) started. It does not reflect dishonesty (moral hazard) or indifference (morale hazard).

Reviewed in our October 2026 California fact-check.

Correct

The answer is D: Underwriting Department

The underwriting department evaluates applications, selects the risks the insurer will accept, classifies them, and sets the terms and premium. Claims staff handle the investigation and payment of losses. Actuaries use statistical data to develop rates and reserves, which underwriters then apply to individual risks. Sales and marketing promote and sell the insurer's products.

Reviewed in our October 2026 California fact-check.