PSI Ohio Insurance Practice Exam

What are warranties in an insurance policy?

1. Promises that are guaranteed accurate

2. Conditions that can void the policy if breached

3. Provisions that limit coverage

4. Options for policy adjustments

The correct answer is: Conditions that can void the policy if breached

Warranties in an insurance policy are specific conditions or promises that the insured party agrees to uphold. When a warranty is included in the policy, it establishes fundamental commitments regarding certain facts or behaviors that the policyholder must maintain. If these warranties are breached, it can result in the insurance company having the right to void the policy from its inception or deny a claim. This emphasizes the importance of the warranties in maintaining the integrity of the policy and ensuring that both the insurer and policyholder uphold their obligations. While warranties are crucial, other elements like coverage limits and options for adjustments focus on different aspects of the policy. For example, conditions that limit coverage pertain to the exclusions and restrictions of what the policy protects against, but these do not inherently allow for the cancellation of the policy itself in the same way a breached warranty does. Similarly, options for policy adjustments involve changing coverage terms but are not related to the strict conditions guaranteed by warranties. Therefore, the defining characteristic of warranties lies in their enforceability and the potential consequences of their breach, which is why the correct answer focuses on the conditions that can void the policy if breached.