Insurance Broker Certification Practice Exam

Which of the following is a statement guaranteed to be true and may breach an insurance contract if untrue?

1. Representation

2. Warranty

3. Affidavit

4. Disclosure

The correct answer is: Warranty

In the context of insurance, a warranty is a statement that is explicitly guaranteed to be true. Unlike representations, which are statements believed to be true at the time they are made but can be proven false without breaching the contract, a warranty holds a higher standard. If a warranty is found to be untrue, it can lead to a breach of the insurance contract, allowing the insurer to deny a claim or void the policy. Warranties are often included as part of the policy to predicate the insurer’s obligations. For example, a warranty might specify that a certain security system is installed in the insured property. If it is later discovered that the system was not installed as promised, the insurer can take action based on that breach. In contrast, representations and disclosures pertain to statements or information provided that can be factual or accurate to the best knowledge of the insured at the time but do not carry the same legal implications if found to be incorrect. An affidavit is a sworn statement but does not apply specifically to the insurance context in the same way as a warranty does. Thus, warranties are essential in understanding contractual obligations in the insurance field.