Massachusetts Life Producer Practice Exam

In insurance terminology, what does the term "warranty" signify?

1. A type of insurance policy

2. A guarantee of future performance

3. A statement that must be true and is part of the contract

4. An optional clause within a policy

The correct answer is: A statement that must be true and is part of the contract

The term "warranty" in insurance terminology signifies a statement that must be true and is an integral part of the insurance contract. This means that the insured party makes a promise regarding certain conditions, situations, or facts that are considered vital to the agreement. If any warranty is found to be untrue, it can have significant implications, potentially allowing the insurer to deny a claim or void the policy altogether. Warranties differ from mere representations, where the accuracy is believed but not guaranteed, whereas warranties represent a more stringent obligation. This distinction is important in the context of insurance contracts, as compliance with warranties is essential for maintaining coverage and protecting the rights of both the insurer and the insured.