Georgia Adjuster Practice Test

What is a warranty in the context of an insurance contract?

1. A suggestion made by an agent

2. A guarantee of truth for the entire policy term

3. A notice of policy changes

4. Only a verbal statement

The correct answer is: A guarantee of truth for the entire policy term

In the context of an insurance contract, a warranty refers to a guarantee of truth for the entire duration of the policy. This means that certain statements, conditions, or representations made by the insured are not merely assurances or suggestions, but rather they are binding commitments. If these warranties are found to be untrue at any point during the coverage period, it can result in the insurer being able to deny a claim or void the policy altogether. For example, if an insured states that their property has a functioning security system and this is included as a warranty in the policy, then it must remain true throughout the time the policy is active. If it is discovered that the security system is non-functional, the insurer may have grounds to deny a claim related to the property. The other options do not accurately capture the essence of a warranty in an insurance contract. Suggestions made by agents, notices of policy changes, and verbal statements lack the binding nature and specific implications that a warranty embodies within the insurance agreement.