South Carolina Personal Lines Practice Exam

What is a warranty in an insurance contract?

1. A clause that outlines coverage limits

2. An absolutely true statement upon which the validity of the policy depends

3. A promise to pay for any claims

4. A provision that allows policy amendment

The correct answer is: An absolutely true statement upon which the validity of the policy depends

A warranty in an insurance contract refers to an absolutely true statement upon which the validity of the policy depends. This means that a warranty is a fundamental part of the agreement that must be accurate and upheld by the insured. If the information provided as a warranty is found to be false or misrepresented, it can lead to the denial of coverage or even voiding the policy entirely. Thus, warranties play a critical role in defining the responsibilities and liabilities of both the insurer and the insured. In the context of insurance contracts, these statements can pertain to various factors, such as the condition of the insured property or the status of the insured’s health, which must be correct for the insurance agreement to be valid.