PSI Ohio Insurance Practice Exam

Statements made by a prospective insured on an application they believe to be true are categorized as what?

1. Misrepresentations

2. Warranties

3. Representations

4. Disclosures

The correct answer is: Representations

The correct choice is representations. When a prospective insured completes an insurance application, any statements they make that they believe to be true and accurate are classified as representations. This is an essential aspect of the insurance application process, as it reflects the insured's honest intentions to disclose necessary information to the insurer. Representations are significant because they form the basis of the insurer's decision to offer coverage and under what terms. If an insured provides accurate representations, they fulfill their duty of utmost good faith, known as "uberrima fides," which is foundational in insurance contracts. In contrast, misrepresentations involve statements that are false, either intentionally or unintentionally, which can affect the insurance contract's validity. Warranties refer to promises that certain conditions will be met or maintained, and disclosures typically relate to the obligation of the applicant to provide material information that could influence the insurer's decision. However, in the context of statements believed to be true made by an applicant, the appropriate term is indeed representations.