Alabama Insurance Adjuster Practice Exam

What are the factual statements made by the insured that form the basis of an insurance policy called?

1. Declarations

2. Representations

3. Affidavits

4. Warranties

The correct answer is: Representations

The factual statements made by the insured that form the basis of an insurance policy are known as representations. These are statements that the insured believes to be true at the time of the application for insurance. They are crucial because they help the insurer assess the risk associated with providing coverage. If these representations turn out to be false and were material to the insurer's decision to offer coverage, it may result in the denial of a claim or even the cancellation of the policy. Representations differ from warranties, which are promises or guarantees made by the insured regarding certain conditions. If a warranty is breached, it may lead to more immediate consequences compared to a misrepresentation. Declarations refer to the statements in the policy that detail the coverage, limits, and insured parties but are not the factual statements made during the application. Affidavits, while legally binding statements of fact, are not specifically related to the insurance application process in this context. Thus, the term that most accurately describes those factual statements made by the insured is representations.