California Life and Health Insurance Practice Exam

How is "policy" defined in the California Insurance Code?

1. A verbal agreement

2. A written contract

3. An oral contract

4. A temporary certificate

The correct answer is: A written contract

In the California Insurance Code, the term "policy" is defined as a written contract between the insurer and the insured. This definition underscores the formal nature of insurance agreements, which must be documented in writing to be enforceable. Having a written contract ensures clarity and provides a record of the terms, coverage, conditions, and benefits outlined in the policy, which protects the interests of both parties involved. Although agreements can be made orally or through verbal statements, these forms do not constitute an official policy in legal terms. A temporary certificate may also be issued as a type of coverage but does not replace the more comprehensive written contract that a policy represents. Thus, the correct understanding of a policy aligns with its definition as a written document specifying the rights and responsibilities of both the insurer and the insured in a clear and binding manner.