State RegulationsCA specific✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
Under California Insurance Code Section 381, when the exact premium of a policy can only be determined when the contract terminates, the policy must instead specify:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
CIC Section 381(f) requires every policy to state the premium or, if the insurance is of a character where the exact premium is only determinable upon the termination of the contract, to state the basis and rates upon which the final premium is to be determined and paid. This alternative applies to coverages priced retroactively, such as certain audited or experience-rated arrangements. The section ensures the premium requirement is satisfied in one of the two statutory forms.
Why the other options are wrong
- B) Section 381 never dispenses with the premium requirement; it requires either the premium stated or the basis for calculating it.
- C) The statute requires the basis and rates for the final premium, not merely a minimum figure with the rest unstated.
- D) The statute refers to the insurer's own premium basis and rates, not to the pricing of competing insurers.
Memory hook
No exact number yet? Then write the formula. Section 381 wants the premium or the recipe for it.