Maryland Life and Health Insurance License Practice Exam

What are statements made by an insurance applicant on an application considered to be?

1. Representations

2. Warranties

3. Declarations

4. Assurances

The correct answer is: Representations

Statements made by an insurance applicant on an application are considered representations. Representations are statements that the applicant believes to be true to the best of their knowledge, made when applying for insurance. These statements are crucial because they help the insurer assess the risk and determine the terms of coverage. Representations are not guarantees; rather, they are assertions made in good faith, and the applicant is expected to provide accurate information based on their understanding of the circumstances. If a representation turns out to be false but the applicant had no intention to deceive the insurer, it typically does not invalidate the policy. However, if a false representation is made with the intent to mislead, it may lead to a denial of claims or policy rescission. In contrast, warranties are strict guarantees made by the applicant, which must be true for the contract to be enforceable. Declarations often refer to factual information included in the insurance policy itself, summarizing coverage details. Assurances, while related to the confidence expressed about a situation, do not hold specific legal significance in the insurance context as the term representation does.