New York Child Abuse Identification and Reporting Practice Exam

How do warranties differ from representations in insurance applications?

1. A warranty is optional, while a representation is mandatory

2. A warranty is guaranteed to be true, while a representation is believed to be true

3. A warranty is a personal guarantee, while a representation is a statistical assurance

4. There is no difference; they are interchangeable terms

The correct answer is: A warranty is guaranteed to be true, while a representation is believed to be true

In the context of insurance applications, the distinction between warranties and representations is fundamental to understanding the obligations of the parties involved. A warranty is a statement or assurance that a certain condition or fact is true and must be upheld. It is an enforceable promise; if the warranty is broken, the insurer has the right to deny the claim or void the policy. Essentially, warranties are guaranteed to be true at all times throughout the duration of the contract. On the other hand, a representation is a statement made by the applicant that is believed to be true at the time it is made, but it is not guaranteed to be true. Representations are based on the applicant’s belief or knowledge regarding certain facts. If a representation is found to be untrue, it may affect the insurer's obligation to cover a claim, but the consequences can differ from those of a breached warranty. This distinction emphasizes that while representations are about the belief of the individual at the time of the application, warranties impose a strict obligation regarding the truth of the stated facts, making it clear why the correct choice focuses on the guaranteed nature of warrants compared to the belief-driven aspect of representations.