Mississippi Property & Casualty Practice Exam

Which term refers to a guaranteed truth within an insurance policy?

1. Wavier

2. Warranty

3. Fraud

4. Co-mingling

The correct answer is: Warranty

The term that refers to a guaranteed truth within an insurance policy is warranty. A warranty in insurance is a provision that creates an obligation on the part of the insured to be truthful about certain facts or conditions. If a warranty is breached, it can allow the insurer to void the policy or deny a claim, as warranties are expected to be upheld as factually true throughout the life of the policy. This is crucial because insurance contracts are based on the principle of utmost good faith, meaning all parties must act honestly and disclose all material facts. The other terms have distinct meanings that do not apply in this context. A waiver refers to the voluntary relinquishment of a known right, typically by the insurer, that may occur under certain circumstances but does not indicate a guaranteed truth. Fraud refers to dishonest acts designed to secure unfair or unlawful gain, which would violate the terms of the policy rather than provide a guaranteed truth. Co-mingling, in the context of insurance, usually refers to mixing different funds or assets which does not pertain to the truths or guarantees outlined in an insurance policy.