Tennessee Insurance Practice Exam

What is the part of a life insurance policy that is guaranteed to be true?

1. Statement

2. Warranty

3. Guarantee

4. Representation

The correct answer is: Warranty

In the context of life insurance policies, a warranty is a specific type of statement that is guaranteed to be true. This means that when a warranty is made by the policyholder, it is a binding promise that can affect the validity of the contract. If a warranty is found to be untrue, it can lead to the policy being voided or the insurer refusing to pay the claim. Warranties differ from representations, which are statements that the policyholder believes to be true but are not necessarily guaranteed. Representations are typically based on the best knowledge and understanding of the individual making them. Thus, while representations are relied upon by insurers during the underwriting process, they do not hold the same weight as warranties in terms of guarantee. Guarantees, while they sound similar, typically refer to the promises made by the insurer regarding coverage or payout amounts, rather than statements made by the policyholder. Therefore, the concept of a warranty as a guaranteed truth in a life insurance policy is critical, as it underscores the legal obligations that exist within an insurance contract.