Rhode Island Life Insurance Practice Exam

Which parts of a life insurance policy are guaranteed to be true?

1. Declaration

2. Warranty

3. Representation

4. Disclosure

The correct answer is: Warranty

A warranty in the context of a life insurance policy refers to a statement or condition that is guaranteed to be true by the policyholder. When a policyholder makes a warranty, they are asserting that specific information is factual, and this assertion becomes legally binding. If it turns out that the warranty is not true, it can have significant implications for the validity of the policy, potentially allowing the insurer to deny coverage or void the policy. In contrast, declarations, representations, and disclosures are not guaranteed to be true in the same binding manner. Declarations summarize the details of the policyholder and coverage but do not carry the same binding promise of accuracy as warranties. Representations are statements made to the insurer that are believed to be true to the best of the policyholder's knowledge but are not guaranteed, which means that if misinformation is provided, it may not necessarily void the policy unless it was material to the risk. Disclosures refer to the information that an applicant provides in the application process, which, while important for underwriting purposes, does not carry the same level of guarantee as a warranty. Thus, warranties are the elements of a life insurance policy that are assured to be accurate and are critical to ensuring that the terms of the policy are upheld.