South Carolina Insurance Practice Exam

What is the term used for statements made by an insurance applicant that must be true?

1. Statement of facts

2. Warranty

3. Guarantee

4. Representation

The correct answer is: Warranty

The term for statements made by an insurance applicant that must be true is warranty. A warranty is a specific type of promise or guarantee within an insurance contract, where the insured asserts that certain facts are true and will remain true. If a warranty is found to be untrue or if the condition is not met, it could give the insurer the right to void the policy or deny a claim. This creates a strong obligation on the part of the applicant to ensure that their statements are accurate and honest. In contrast, representations are statements that an applicant believes to be true. While they should be honest and accurate, they do not have the same legal implications as warranties. If a representation is found to be false, it may not necessarily void the contract unless it is proven that the insurer was materially misled. The other terms, like guarantee and statement of facts, do not specifically convey the same degree of obligation and legal significance that a warranty does within an insurance context.