What is a warranty in insurance terms?

In insurance, a warranty refers specifically to the absolute or literal truth of a statement made by the insured or applicant. This means that any statements or representations made during the application process must be entirely accurate, not just reasonable or believed to be true to the best of the applicant's knowledge. If a warranty is found to be false, it can allow the insurer to deny a claim or void the policy altogether.

This concept is crucial because it establishes the expectation of accountability and truthfulness in the insurance agreement. The insurer relies on the accuracy of the information provided when assessing risk and underwriting the policy. Therefore, warranties hold significant weight in determining the validity of a policy and the insurer's obligations under it.

Other options may reflect different concepts within the realm of insurance, such as performance promises or financial estimates, but they do not accurately capture the specific definition of a warranty as it is used in the insurance context.