PSI Life Exam Practice Test

What is the primary purpose of insurance warranties made by the insured?

1. To outline policy premiums

2. To ensure compliance with regulations

3. To guarantee the truthfulness of statements

4. To establish trust between parties

The correct answer is: To guarantee the truthfulness of statements

The primary purpose of insurance warranties made by the insured is to guarantee the truthfulness of statements made in the insurance application or during the policy period. Warranties are promises that certain conditions or facts are true, and if they are found to be false, it can result in a denial of a claim or even cancellation of the policy. This aligns closely with the insurer's need for transparency and accuracy in the information provided, as these details directly influence underwriting decisions and risk assessments. While other options may touch on related themes—ensuring compliance with regulations might refer to broader legal requirements, outlining policy premiums pertains more to pricing structures, and establishing trust is an important aspect of any contractual relationship—none capture the specific function of warranties as accurately as the assurance of truthfulness. Thus, the focus of warranties is fundamentally on the accuracy and reliability of the representations made by the insured.