Hawaii Insurance License Practice Exam

An agreement between an insured and the insurer that certain conditions will be met is called a what?

1. Condition

2. Clause

3. Warranty

4. Guarantee

The correct answer is: Warranty

A warranty in the context of insurance is defined as a specific type of promise or agreement made by the insured that certain conditions or facts are true, which the insurer relies upon when issuing the policy. Warranties are essential as they establish the insured's obligation to comply with those conditions throughout the life of the policy. If a warranty is not met, it may result in the insurer having the right to deny a claim or void the policy. Understanding what distinguishes a warranty from other terms such as condition, clause, or guarantee is crucial. While conditions are essential aspects of an insurance contract that must be fulfilled for coverage to apply, a warranty carries a higher standard of promise, often relating to factual statements that are validated. Meanwhile, a clause is a broader term used to denote any provision within a policy or contract, and a guarantee usually refers to a promise of assurance regarding performance or quality, which may not have the precise legal implications tied to an insurance context like a warranty does.