West Virginia Property and Casualty Licensing Practice Exam

What best characterizes a representation in an insurance application?

1. A binding agreement between parties

2. A statement made by the lawyer

3. A statement made by the insurer about existing conditions

4. A detailed explanation of coverage

The correct answer is: A statement made by the insurer about existing conditions

In the context of an insurance application, a representation is best characterized as a statement made by the applicant regarding existing conditions. This means that when a person applies for insurance, they provide information about their circumstances, such as their health, property, or any other relevant details that could affect the underwriting process and the resulting policy. This information is relied upon by the insurer when assessing risk and deciding on coverage. Representations are statements that are typically expected to be truthful, but they differ from warranties, which are promises that certain conditions will be upheld. While representations must be accurate to the best of the applicant's knowledge, they do not constitute a legally binding agreement between the parties. Furthermore, they are not legal statements provided by lawyers or extensive explanations of coverage; rather, they represent the applicant's disclosures about their situation to help the insurer evaluate the risks involved accurately.